Introduction

• Author: Andrew P. Loewinger - Michael K. Lindsey
• Pages: xv-xxxi

Introduction

xv

I. Overview

The worldwide success of franchising has triggered a surge of franchise-spe-

cific legislation. Consider the following: In 1980, there were only two countries

(the United States and Canada (the province of Alberta)) with any national or

local franchise disclosure requirements. In 1990, there were only four countries

(Canada, France, Mexico, and the United States) with such laws. By 2000, nine

more countries (Australia, Brazil, China, Indonesia, Macau, Malaysia, Roma-

nia, Spain, and Taiwan) had added such laws. As of the initial publication of this

book in 2006, there were six more countries (Belgium, Italy, Japan, South Ko-

rea, Sweden, and Vietnam) that had implemented franchise legislation or had

recognized pre-sale disclosure requirements. As of the date of publication of

this edition, a total of 23 countries have adopted some form of franchise disclo-

sure legislation of the type addressed in this book. While we may be at a pla-

teau, it is obvious to most commentators that this stream of franchise-specific

legislation has not yet been exhausted.

There are several reasons for the spate of activity and several broad trends

underlying the quickened pace of international franchise regulation. First, there

has been a dramatic increase in international franchise activity, with successful

companies in countries around the world expanding outside their original do-

mestic markets. Not surprisingly, with this level of commercial activity, fran-

chising has drawn increased scrutiny from regulatory authorities in a wide array

of countries. Second, as a business method, franchising still remains novel for

many and warrants distinctive treatment.

Third, and most significantly for this book, the dominant means of regulat-

ing franchising has been through pre-sale disclosure as distinguished from reg-

istration or regulation of the franchise relationship. Such regulatory activity has

been found not just in new countries or jurisdictions enacting new laws; many

countries—now with experience in regulating the franchise sales process—are

amending their laws and implementing or revising their regulations. This activ-

ity will no doubt continue.

A. Purpose of Book

The purpose of this book is to provide a thoughtful, useful, and succinct reference

for the franchise practitioner to use in navigating the mostly uncharted waters of

international franchise sales laws. As noted above, the overwhelming majority of

these laws are either relatively new or have recently been updated. The novelty of

the laws, the different regulatory schema used, and the different substantive and

xvi International Franchise Sales Laws

1. Argentina and Tunisia are the only countries with franchise disclosure requirements

that are not included in this book. In Tunisia, the editors were unable to identify two Tunisian

attorneys with sufficient expertise to provide the peer review and thus the accuracy expected

in each of the country chapters addressed in this book. Argentina’s law, which has minimal

disclosure requirements, was passed in late 2014 as this edition was being finalized.

formal requirements all present challenging questions to franchise counsel and

their clients seeking to comply. Their scope, administrative implementation, and

judicial interpretation are largely untested. That said, as Franchisors in the United

States and other countries expand beyond their home borders, there is a great

need for some guidance to interpret the vagaries of such laws. We hope this book

fills that void.

B. Scope and Methodology

The book addresses disclosure requirements in the countries of Australia, Bel-

gium, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Macau,

Malaysia, Mexico, Romania, South Africa, South Korea, Spain, Sweden, Tai-

wan, the United States, and Vietnam.1 Each chapter addresses specific require-

ments under each of the disclosure laws, as described further below. In each

chapter, two or more authors licensed to practice in the jurisdiction about which

they are writing have addressed the same disclosure requirements in a uniform

format. We have organized each country chapter section in this way to provide,

first, a comprehensive discussion of each of these laws and, second, a practical

and easy-to-use reference for counsel to comply with each jurisdiction’s laws.

The sections address the following issues under each jurisdiction’s disclosure

law:

•What is a Franchise? (Scope of the Law; Applicability to Master Fran-

chisees; Exemptions; Discretion of Regulatory Authorities; and Juris-

diction)

•Who Must Provide Disclosure? (Franchisor; Master Franchisee; Fran-

chise Consultant/Agent/Broker; Franchisor or Others in Master Fran-

chise Agreement)

•Who Must Receive Disclosure? (Who Must Receive Disclosure Docu-

ment?; Applicability to Renewing and Transferee Franchisees or Master

Franchisees; Exemptions)

•When Must Disclosure Be Furnished? (Timing; Letters of Intent; Meth-

ods of Delivery of a Disclosure Document; Ongoing Disclosure Obliga-

tions)

•Information to Be Included in Disclosure Document (Specific Matters

for Disclosure; Disclosure of Material Information; Use of Supplemen-

tal Disclosure Documents; Updating Requirements)

•Governmental Filings or Approvals (Initial Filing Requirements; Other