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Legal Maneuvers

When franchising meets the Web...
June 1, 1998
URL: http://www.entrepreneur.com/article/15918

National franchisors no longer have to worry about stepping on the toes of state franchise regulators when advertising on Web sites--at least not in Indiana.

In response to concerns that franchisor Web sites may violate state franchise laws if accessed in states where the franchisors are not registered, the Indiana Securities Commission announced last December that if the franchisor indicates on the site that the offering is not available in Indiana, there is no violation of Indiana law. "What this order attempts to do is allow franchisors to utilize the Internet without fear of violating our law," explains Bradley W. Skolnik, Indiana's securities commissioner.

Because the offering of information by franchisors is similar to that of securities, the Federal Trade Commission (FTC) is expected to follow the Securities and Exchange Commission's lead this year by creating a national policy on offering franchise information over the Internet. It's difficult to tell whether individual states will continue to make their own policies, however.

"Because the Internet is [accessible] everywhere, it may become impossible to force franchisors to meet two or three different state and federal regulations," says Stanley P. Jaskiewicz, a lawyer with the Philadelphia law firm of Spector, Gadon & Rosen PC.

Although franchisors can provide information over the Internet to prospective buyers, that information will not replace the Uniform Franchise Offering Circular (UFOC) or nullify state registration requirements.

So where does that leave you? Not far from where you started if you're researching franchisor information. "The Internet is a cheap and quick way to find out what the franchisor wants to tell you," says Jaskiewicz, "but remember, it has not been reviewed by the FTC or state regulators. Look at it as you would any other advertisement. Do your homework and read the UFOC."

Contact Sources

Indiana Securities Commission, 302 W. Washington St., Rm. E-111, Indianapolis, IN 46204

Spector, Gadon, & Rosen PC, 1635 Market St., 7th Fl., Philadelphia, PA 19103, (215) 241-8866