Federal

In the United States, the Federal Trade Commission (“FTC”) regulates the sale of franchises under the FTC Franchise Rule in a similar manner to the Securities and Exchange Commission’s regulation of the sale of securities. The intent of any franchise law, federal or state, is to protect buyers from fraud and misrepresentation; some laws also attempt to protect buyers from any undue advantage that the franchise seller has due to its size and financial resources. For this reason, franchise laws usually contain a disclosure component requiring that the prospective buyer be provided with a document describing the franchise and containing relevant forms of agreement, a certain number of days ahead of the sale of the franchise. States have their own laws about advance delivery times and may or may not exactly correspond to federal law. The document was formerly called a Uniform Franchise Offering Circular but is currently referred to as a Franchise Disclosure Document.

A paralegal’s responsibilities in preparing the Franchise Disclosure Document might include verbally interviewing clients about their franchise program and writing the update themselves or asking in-house departments to update each section of the FDD and managing the process through meetings and email requests. If you are in a law firm, you may deal with one point person at the client’s office; in a company, you probably deal with multiple contributors of franchise information. Identifying key people – the ones who can sit in the witness box during a trial and discuss (and ideally, provide backup for) the information they gave you — is critical. That’s a worst-case scenario, but if you think of it that way it becomes clearer that you as the paralegal do not need to be the person justifying or explaining the store count or the contents of the operations manual.

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