Franchise & Distribution Law Update, Spring 2009






Maryland Legislature Passes Law Prohibiting Minimum Prices

A recently enacted Maryland law, the Maryland Antitrust Act, prohibits manufacturers and resellers from imposing minimum prices on the resale of their products.  This law, which applies to dealers or retailers doing business in Maryland, as well as transactions in which consumers in Maryland purchase products on the internet, may have a substantial impact on how franchisors and distributors approach pricing decisions for their products.  Continue 

Virginia Reconciles Disclosure and Registration Law With Amended Rule

A piece of emergency legislation in Virginia was passed and made effective on March 6 to address confusion arising from differing terminology in the Virginia Retail Franchising Act and the FTC Amended Rule.  The bill replaces all references in the registration and disclosure law from “grants” of franchises to “sales” of franchises.  Due to this legislation, franchisors will no longer be required to include a Virginia Addendum within their franchise disclosure documents adding specific language to the cover pages and receipt pages regarding the “grant” of a franchise. 


Arbitration Fairness Act of 2009 Introduced in the U.S. House of Representatives

The so-called Arbitration Fairness Act of 2009, introduced on February 12, would amend the current Federal Arbitration Act and its specific application to franchise agreements.  Continue

The Employee Free Choice Act of 2009 Revisited

Also known as “Card Check,” this bill, recently introduced in both the U.S. Senate and the U.S. House of Representatives, presents hotly-contested issues that have the potential to adversely affect many franchisors and franchisees.  The bill would substantially amend current union laws, by allowing the formation of a labor union if a majority of the employees have signed union authorization cards.  Continue


Legislation Regarding Renewal Provisions in Arizona Considered

A bill introduced on February 10 in Arizona potentially imposes significant changes on the renewal terms of franchise agreements entered into in Arizona.  Specifically, it would require franchise agreements subject to the legislation to contain a provision allowing the franchisee to renew its right to operate as a franchisee for three successive five year terms, provided that the franchisee is not in material breach of the franchise agreement during the term prior to the next renewal term.  Continue

 Amendment to Definition of Franchise in Illinois Considered
If enacted, Illinois House Bill 3977 would amend the definition of “franchise” in the Illinois Franchise Disclosure Act.  Currently, this definition includes the concept that a franchisee must be required to pay, directly or indirectly, a franchise fee of $500 or more.  Continue

Protecting Confidential Information in Tough Economic Times
by Cyndi Klaus

Now more than ever, franchisors need to be more cognizant about protecting their confidential information.  Customer lists, among other confidential information, are an extremely valuable asset of a franchise system and should be carefully protected.  Therefore, threats by a franchisee or former franchisee to disclose customer lists to competitors must be taken seriously.  Such threats many times accompany termination of a franchisee, who is looking to shift its business elsewhere.  Fortunately, with quick action, franchisors may be able to stop unwanted dissemination and protect sensitive information.

CLIENT FOCUS: Anytime Fitness Opens 1,000th Club!

Anytime Fitness, a franchisor of 24-hour co-ed fitness centers based in Hastings, Minnesota, recently became the first and only co-ed fitness club chain in the world to open its 1,000th club.  An impressive milestone in itself, the company is also continuing to thrive and expand even in difficult economic times, demonstrated by the fact that Anytime Fitness has opened 90 clubs in the last two months alone.  Continue


1500 Wells Fargo Plaza, 7900 Xerxes Avenue South, Minneapolis, MN 55431-1194

This alert is provided as a service to our clients and firm associates.  While the information provided in this publication is believed to be accurate, it is general in nature and should not be construed as legal advice.  

Spring 2009



Fittante and Fleming to Speak at International Franchise Association 2009 Legal Symposium

Larkin Hoffman’s Joe Fittante and Michael Fleming will each be featured at the International Franchise Association’s Legal Symposium, which will be held on May 17-19 in Washington D.C.

Modell to Speak at Minnesota State Bar Association Program

Chuck Modell will be featured as a presenter next month at a Minnesota State Bar Association continuing legal education seminar on franchising.  His presentation is entitled “When Does A Business Relationship Become a Franchise,” and will address the elements of a franchise, and the point at which a distributor or licensing relationship crosses the line into becoming a franchise relationship.
Fittante and Bauer Publish Article Outlining Default and Termination Process

Joe Fittante and Meredith Bauer published an article in the Spring 2009 edition of the Franchise Law Journal entitled “Defaults and Terminations: An Unfortunate Reality of a Challenging Economy.”  This article provides a practical approach to the mechanics of the default and termination process.  It outlines the various applicable state relationship laws, and discusses both the jurisdictional application of these laws, as well as their application to exempt franchisors.  In addition, the article highlights certain unique aspects of the relationship laws of which franchisors and their counsel should be aware.  Finally, the article provides an analysis and helpful tips regarding the mechanics of the termination process.

To read the article, click here.

Klaus and Bauer Publish Article Regarding Recent Cases in Franchising

In the March 2009 issue of the Law Journal Newsletter – Franchising Business & Law Alert, Cyndi Klaus and Meredith Bauer discuss a recent California case interpreting an arbitration provision in a franchise agreement, and the status of the law regarding arbitration agreements and choice of law provisions in California. 

This article also examines a recent case in which a franchisee leased its franchised location to a competitor after breaching its franchise agreement, and the court determined that this was not a violation of the noncompete provision.

Contact our Larkin Hoffman Franchise and Distribution group members:

Charles S. Modell
Email 952-896-3331

Joseph J. Fittante, Jr.
Email 952-896-3256

William G. Thornton
Email 952-896-1578

Jon S. Swierzewski
Email 952-896-3800

Cynthia M. Klaus
Email 952-896-3392

James M. Susag 
Email 952-896-1572

Pamela N. Merkle
Email 952-896-3337

Meredith A. Bauer 
Email 952-896-3263

Andrew F. Perrin
Email 952-896-3394

Edward J. Driscoll
Email 952-896-3235