Franchising a Business in Tennessee: Laws & Requirements | Internicola Law Firm

Tennessee Franchise Law and FDD Registration

Tennessee is not a franchise registration state but has enacted franchise relationship laws.

Tennessee Franchise Law

Tennessee is not a franchise registration state but has enacted franchise laws that govern the relationship between franchisor and franchisee. Franchisors are not required to register or file a FDD in the state of Tennessee but must comply with Tennessee’s franchise relationship laws and the Federal Franchise Rule requiring FDD issuance and disclosure 14 days prior to the signing of a franchise agreement or acceptance of any fees.

What qualifies as a franchise under Tennessee law is broadly defined to include all oral or written agreements that grant another party, either (a) the license and right to use a trademark within an exclusive territory, or (b) the right to sell or distribute goods or services within an exclusive territory. Once a franchise relationship is established Tennessee Code 47-25-15, et. seq., prohibits franchisors from undertaking certain actions related to the termination, non-renewal, or modification of franchise rights within the state. Franchisors must undertake their franchisee relationship actions in good faith, afford franchisees cure opportunities and other rights set forth in the code.

To learn more about Tennessee franchise law and how we can help, contact us at (800) 976-4904 or by email.

Tennessee Franchise Relationship Laws

Tennessee franchise law imposes franchisee relationship obligations on franchisors. These relationship laws provide franchisees with supplemental rights that condition when and how a franchise agreement may be terminated and rights that allow family and third-party transfers without approval of the franchisor.  Below is a summary of some of Tennessee’s franchise relationship obligations and prohibitions:

…Good Cause means…failure by a franchisee to comply substantially with the requirements imposed or sought to be imposed upon the franchisee by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement, and which requirements are not in violation of any law or regulation…

Withholding products, services, or support without prior and proper termination after notice, constitutes an act of termination in violation of Tennessee law.

Instances of default where a franchisor may potentially terminate a franchise without providing an opportunity to cure are listed in 47-25-1504, and include franchisee circumstances involving: bankruptcy, judicial insolvency, abandonment, material misrepresentations made by the franchisee at the time of entering into the franchise agreement, foreclosure and/or loss of franchisee leasehold interests in the business premises, criminal conduct or felony conviction relevant to the operation of the franchised business, and failure on two or more occasions to pass minimum health inspections.

Violations of Tennessee’s franchise relationship laws entitle franchisees equitable and legal relief for damages, including attorney fees.

Joint Employer Liability and Franchising in Tennessee

In support of the franchise business model and as a counter to Joint Employer Liability determinations previously made by the NLRP, Tennessee Code, Title 50, Chapter 1, Section 208 provides franchisors with a joint employer liability shield. That is, Tennessee specifically disclaims any employment relationship between franchisors with, either, franchisees or, employees of their franchisees. Tennessee law specifically states:

(a) Notwithstanding any voluntary agreement entered into between the United States department of labor and a franchisee, neither a franchisee nor a franchisee’s employee shall be deemed to be an employee of the franchisor for any purpose.

(b) For purposes of this section “franchisee” and “franchisor” have the same definitions as set out in 16 CFR 436.1

Tennessee Franchise Law Links

MORE INFORMATION

Visit our interactive franchise registration map and learn more about state franchise laws, FDD registration states, and required franchise filings.

To learn more about Tennessee franchise law and registration, contact us at (800) 976-4904 or contact us online.

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