N.Y. General Business Law § 681 : General Business — Franchises — Definitions

19 Apr 2016

Current through 2016 New York Laws, Chapters 1 to 237

1. "Advertisement" includes any written or printed communication, or any communication by means of recorded telephone messages or spoken on radio, television, or similar communications media, published in connection with an offer or sale of a franchise.
2. "Department" means the department of law.
3. "Franchise" means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:
(a) A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor, and the franchisee is required to pay, directly or indirectly, a franchise fee, or
(b) A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate, and the franchisee is required to pay, directly or indirectly, a franchise fee.

A franchise under this article shall not include any agreement, contract, or franchise subject to the provisions of article eleven-B of this chapter or section one hundred ninety-nine of this chapter, or any agreement or contract for the sale of motor fuel.

4. A "franchisee" is a person to whom a franchise is granted.
5. A "franchisor" is a person who grants a franchise.
6. "Area franchise" means a contract or agreement between a franchisor and a subfranchisor whereby the subfranchisor is granted the right, for consideration given in whole or in part for such right, to sell or negotiate the sale of franchises in the name or on behalf of the franchisor; unless specifically stated otherwise, "franchise" includes "area franchise".
7. "Franchise fee" means any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay directly or indirectly for the right to enter into a business under a franchise agreement or otherwise sell, resell or distribute goods, services, or franchises under such an agreement, including, but not limited to, any such payment for goods or services. The following are not the payment of a franchise fee:
(a) The purchase or agreement to purchase goods at a bona fide wholesale price;
(b) The payment of a reasonable service charge to the issuer of a credit card by an establishment accepting or honoring such credit card;
(c) Amounts paid to a trading stamp company by a person issuing trading stamps in connection with the retail sale of merchandise or services;
(d) The purchase or lease, at fair market value, of real property or agreement to so purchase or lease real property necessary to enter into the business or to continue the business under the franchise agreement;
(e) The payment of a fee which on an annual basis does not exceed five hundred dollars where the payor receives sales materials of an equivalent or greater value than his payment;
(f) The purchase of sales demonstration equipment and materials furnished at cost for use in making sales and not for resale;
(g) A lease, license or other agreement by a retailer permitting the lessee, licensee or beneficiary to offer, sell or distribute goods or services on or about the premises occupied by said retailer.
8. "Franchise sales agent" means a person who directly or indirectly engages in the offer or sale of any franchise on behalf of another. Franchisors, subfranchisors, and their employees are not to be considered franchise sales agents.
9. "Franchise salesman" means each and every person employed by a franchisor or franchise sales agent for the purpose of representing such franchisor or franchise sales agent in the offer or sale of any franchise.
10. "Fraud," "fraudulent practice," and "deceit" are not limited to common law fraud or deceit, and include:
(a) Any deception, concealment, suppression, device, scheme or artifice employed by a franchisor, franchise sales agent, subfranchisor or franchise salesman to obtain any money, promissory note, commitment or property by any false or visionary pretense, representation or promise;
(b) Any material misrepresentation in any registered prospectus filed under this article; or
(c) The omission of any material fact in any registered prospectus filed under this article.
11. "Offer" or "offer to sell" includes any attempt to offer to dispose of, or solicitation of an offer to buy, a franchise or interest in a franchise for value. The terms "offer" and "offer to sell" do not include the renewal or extension of an existing franchise where there is no interruption in the operation of the franchised business by the franchisee.
12.
(a) An offer or sale of a franchise is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or, if the franchisee is domiciled in this state, the franchised business is or will be operated in this state.
(b) An offer to sell is made in this state when the offer either originated from this state or is directed by the offeror to this state and received at the place to which it is directed. An offer to sell is accepted in this state when acceptance is communicated to the offeror from this state.
(c) An offer to sell is not made in this state merely because a publisher circulates or there is circulated on his behalf in this state a bona fide newspaper or other publication of general, regular and paid circulation which has had more than two-thirds of its circulation outside this state during the past twelve months, or a radio or television program originating outside this state is received in this state.
13. "Person" means an individual, corporation, partnership, joint venture, association, company, trust, unincorporated organization or other entity and shall include any other person that has a substantial interest in or effectively controls such person, as well as the individual officers, directors, general partners, trustees or other individuals in control of the activities of each such person.
14. "Publish" means publicly to issue or circulate by newspaper, mail, radio or television, or otherwise to disseminate to the public.
15. "Sale" or "sell" includes every contract or agreement of sale, contract to sell, or disposition of, a franchise or interest in a franchise for value.
16. "State" means any state, territory, or possession of the United States, the District of Columbia and Puerto Rico.
17. "Subfranchisor" means a franchisee who has the right to sell or subdivide his franchise to another or others, known as "subfranchisees," while having and retaining all or part of the franchisor's interest or rights under franchise agreements with such subfranchisee. Under this article and in this situation, the subfranchisee shall be considered the franchisee, and both the principal franchisor and the subfranchisor shall be considered the franchisor.
18. In any proceeding under this article, the burden of proving an exemption or an exception from a definition is upon the person claiming it.
N.Y. Gen. Bus. Law § 681