New York Franchise Regulation: Proceed With Caution!
New York is a franchise registration state which means that before you offer or sell a franchise "from" or "within" New York your FDD must first be registered with the New York Attorney General. When dealing with New York you need to be careful and you need to understand some of the follow scenarios that may subject you to New York's franchise registration requirements:
- You conduct business from New York – If you franchise company is a New York corporation or you conduct business from the State of New York then you need to understand that New York may govern each and every franchise transaction that you engage in. That is‚ even if you never sell a New York franchise – just because you operate from New York means that your FDD must be registered with the New York Attorney General. So if you operate from the State of New York‚ before selling a franchise in Texas you must be registered in NY. There are many more examples of the extensive nature and alleged reach of New York's regulation.
- You conduct negotiations from New York – Even if you dont operate your franchise company from New York‚ if you have franchise sale meetings in or from a location in New York then you will be subjected to New York regulation.
- You Offer or Sell a Franchise to a New York Resident – Even if the eventual franchise will not be located in New York‚ if the prospective franchisee is a resident of the State of New York then you need to be registered here.
- You Offer or Sell a Franchise to be Located in New York – This is an easy one an naturally you must be registered in New York.
Fines‚ Penalties and Civil Lawsuits
new York regulation is extensive and no matter how good your intentions are‚ chances are that if you violate New Yorks regulation requirements you will be subjecting your company to fines and penalties.
Legal action may include criminal penalties‚ such as a felony offense‚ as well as a $50‚000 fine for the violation you have committed. Or you may face civil penalties‚ such as a private lawsuit.
In a private lawsuit‚ liability may extend to a franchisor's:
- directors and
- employees who materially aided in the violation.
When you register your franchise in New York‚ it must include certain state-certified disclosures that are provided in the New Franchise Seller Disclosure Form. A failure to properly provide these disclosures may violate franchise registration statutes.
Learn More About Getting Through the Maze
To learn more about New York regulation and registering your FDD contact us at (800) 976-4904.