A Legal Blog for Franchisors

Court Appears Skeptical of IFA’s Challenge to Seattle’s $15 Minimum Wage Law

Posted in Legislation

The U.S. District Court for the Western District of Washington heard oral argument today on the International Franchise Association‘s motion for a preliminary injunction against the City of Seattle. The IFA is seeking to enjoin implementation of the City’s $15 per hour minimum wage ordinance against small franchisees. The ordinance, adopted in 2014, requires large employers (defined as those with more than 500 employees) to raise wages at a faster pace than small businesses. The ordinance lumps franchisees affiliated with a franchise network in with large employers, even if the local franchisee only employs a small number of employees. The IFA and several local franchisees filed a lawsuit against the City claiming that the inclusion of franchisees (regardless of size) as a large employer is unconstitutional.

At oral argument, the court appeared to be very skeptical of the IFA’s position, peppering the IFA’s counsel (former United States Solicitor General, Paul Clement) with questions. The IFA submitted copies of emails between Seattle City Council President Tim Burgess and Nick Hanauer, a member of the mayor’s advisory committee, in which Hanauer appeared to acknowledge that the ordinance was intended to discriminate against out-of-state franchised businesses. The court seemed to disregard that evidence, despite the fact that the City submitted virtually no evidence to contradict Hanauer’s views of the law’s intent or the City’s apparent adoption of Hanauer’s views.

The court concluded the hearing by noting that it would try to issue a written ruling by March 17, 2015.

News from Around the World: South Korea and Indonesia

Posted in Around the World, Franchisor, International Franchising

South Korea

Will Woods of Baker & McKenzie gave an update on the 14 February 2014 amendments to the Korean Fair Franchise Transactions Act. A few of the changes that took effect in February are retroactive and will apply to contracts already in place at the time of the amendments.

Retroactive amendments include:
• franchisors must have ‘just cause’ to require upgrades or improvements to franchised locations; • franchisors are required to share the cost of required upgrades: 20 per cent if relocation or expansion is not required, 40 per cent cost share if relocation or expansion is required; and

• franchisors are prohibited from requiring franchisees to operate their business during hours that are deemed ‘unreasonable’, and a franchisee may reduce their hours under certain circumstances, including illness that prevents the franchisee from operating the business during night time hours.  Continue Reading

News from Around the World: Germany

Posted in Around the World, Franchisor, International Franchising

Editor’s Note: This series of posts we’re calling “Around the World” come from a larger piece written by Shannon McCarthy and published in the October 2014 edition of the International Bar Association’s International Franchising Newsletter. Updates were provided by speakers at the Annual IBA/IFA Joint Conference that took place in Chicago in May 2014.

Dr. Dagmar Waldzus of Buse Heberer Fromm gave us an update on a couple of recently-decided cases, but first provided a framework for understanding these latest trends. Germany is a civil law country and has no franchise law legislation; however the German Civil Code obligates all contracting parties to act in good faith: ‘an obligor has a duty to perform according to the requirements of good faith, taking customary practice into consideration.’

While there are no statutory pre-contractual disclosure requirements, guidelines for pre-contractual franchise disclosure or communications come from other commercial areas of law such as M&A, consumer protection, product liability and franchise law. Additionally, the Code of Ethics of the German Franchise Association applies to all members.

Continue Reading

Washington DFI Proposed Rule Changes

Posted in Franchisor, Legislation, Washington FIPA

The Washington State Department of Financial Institutions recently published proposed changes to the agency regulations governing delivery of an FDD subject to Washington’s Franchise Investment Protection Act. The new provision would expressly permit franchisors to deliver an FDD over the internet or by other electronic means. The current rule is silent as to the method of delivery of an FDD.

The rules would require a franchisor to deliver the FDD as a single document that only consists of information required by NASAA’s 2008 Franchise Registration and Disclosure Guidelines. An FDD cannot contain links to external websites or content, and the recipient must be able to download, save, and print the FDD.

Franchisors wanting to take advantage of electronic delivery will be required to keep records that prove delivery was made in compliance with the rule and make those records available on demand by the administrator of the Securities Division.

A full copy of the proposed rule can be found here, and would amend WAC 460-80-300.

A public hearing on the proposed rules is scheduled for March 25, 2015 and the Securities Division is accepting comments through that same date.