Healthy franchisor-franchisee relations require effective franchise sales law compliance program.

In order to create healthy relationships with franchisees, franchisors must start out on the right foot. Pre-sale best practices begin with advertising and extend through delivery of the UTFOC and execution of fine franchise agreement.

A robust franchise sales law compliance program is essential to application of these best practices. It ensures adherence with federal and state franchise disclosure and registration law and minimizes the likelihood of costly governmental enforcement actions and lawsuits. Equally important, it leads to the recruitment of the very best franchisees those with realistic expectations about the franchise system.

Beginning March 1, 2003, the International Franchise Association (IFA) assumed responsibility for administration of the National Franchise Council (NFC) and IFA is now making available to all franchisors the pioneering franchise sales law compliance training program originally developed between NF and the Federal Trade Commission.

The one-half day training program, conducted by the author at the franchisors offices, has been provided to more than 50 franchise systems since 1998. It addresses the offer and sale of franchises in an engaging--and frequently humorous (for an attorney)--manner. Covered topics include advertising; disclosure of earnings claims and financial performance information (invariably the most provocative topic!); multi-state transactions; disclosures regarding franchise brokers, lead referral networks, subfranchisors and area developers; franchise registration, renewal and amendment; negotiation with prospective franchisees (another hot topic); and the updating and delivery of UFOCs. The focus is practical, not theoretical and the training is intended primarily for non-legal personnel.

The training is provided at the franchisor's offices to allow maximum participation of those persons responsible for franchise development and sales, advertising, training, field support and regulatory compliance. (In-house and outside lawyers are permitted to participate--although they're not allowed to speak in Latin!) This often leads to in-depth discussion of "hypothetical" compliance issues that the franchisor is confronting and freewheeling discussions of both operational and legal issues. Although there are core issues that are covered in every training session, it is sufficiently flexible to permit focus on additional issues of particular concern to the franchisor.

This new program is an outgrowth of the NFC Alternative Franchise Sales Law Enforcement Program launched in 1998 under an innovative partnership between fine National Franchise Council and the Federal Trade Commission. This program --now administered by IFA--was intended to provide the regulatory community with a mechanism to address minor and technical violations of franchise regulations and, in addition to the FTC, has been embraced by key regulatory states.

Under the alternative enforcement program, franchisors undergo comprehensive franchise sales law compliance training. Additionally, depending upon the terms of the referral agreed up by the FTC (or state enforcement agency) and the errant franchisor, IFA may also perform monitoring and provide injured franchisees with an opportunity to enter into mediation with the franchisor in accordance with the independently-administered National Franchise Mediation Program. Referrals from the Federal Trade Commission have typically been in lieu of formal enforcement actions; referrals from states (including Maryland, New York, Rhode Island and Virginia) have been pursuant to the terms of court-filed settlements.

The instructional techniques and course materials developed for this program--including the NFC Franchise Disclosure Law Compliance Manual--are now being made available to all franchisors. Through the NFC Alternative Franchise Sales Law Enforcement Program and the new IFA Franchise Sales and Disclosure Law Compliance Training Program, IFA seeks to increase compliance with federal and state franchise sales law and enhance the effectiveness of pre-sale disclosure as a means of ensuring healthy franchisor-franchise relationships.

All franchisors--whether start-ups or mature, national systems--benefit from the franchise sales law compliance training. Should you have any questions shout the program, contact Neil A. Simon, IFA Director of Regulatory Compliance Programs at [phone] or [e-mail].