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Disclaimers Under New York Law that Franchisors Need to Be Aware of when Advertising Franchise Sales and Using Websites

Due to the broad scope and application of New York's Franchise laws, franchisors who have not registered their FDD in New York need to be aware of the possibility of inadvertently triggering New York franchise regulation through "broadcast internet communications" that reaches a New York resident. That is, an internet advertisement may unintentionally constitute an illegal offer to sell a franchise in New York.

To address this issue New York Law provides specified "safe harbor" disclaims that Franchisors should consider and discuss with their franchise lawyer. 13 NYCRR § 200.13 states:

Any communication made through the Internet, the World Wide Web, or any other similar proprietary or common carrier electronic delivery system, of an offer to sell a franchise that is not registered in New York, ("Internet Offer") (A) is exempt from registration provisions, (B) will not be in violation of the registration provisions, (C) can meet a safe harbor from the registration requirements if:

  1. The offer indicates, directly or indirectly, that the franchise is not being offered to residents of this state.
  2. The offer is not otherwise directed to any person in this state by or on behalf of the franchisor or anyone acting with the franchisor's knowledge; and
  3. No franchise is sold in this state by or on behalf of the franchise or until the offering has been registered and declared effective and the Uniform Franchising Offering Circular has been delivered to the offeree before the sale in compliance with Article 33 of the General Business Law, the New York Franchise Act. When planning out your website, advertisements and franchise sales media it is critical to assess state regulations and insure that you implement the necessary disclaims.
Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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