The Accidental Franchise and the New York Restaurateur

SUMMARY

Most restaurateurs and other businesspeople (and in fact, many attorneys) are oblivious to the fact that federal and state franchise laws extend beyond traditional franchisors, such as those engaged in the fast food, hotel/motel and convenience store sectors of our economy.  Franchise laws generally define the terms “franchise” and “franchisor” so broadly as to embrace businesses, business relationships, licenses and distribution methods that seem to have nothing to do with traditional franchising. Accordingly, both federal and state franchise regulations apply in New York to any arrangement, whether it is called a “franchise” or not, that fits the definition of franchise under either federal law or the New York State franchise law. Therefore, many restaurants and other businesses can “accidentally” be subject to franchise law. And the consequences of non-compliance with these regulations can be significant.