New York has a broad definition of a franchise, thus, leading to a broad range of mere “licensing” and “agent/distributor” relationships as franchises. Any business organization that is deemed or may be deemed a franchise by the State of New York should, immediately, retain a New York-based franchise attorney with significant experience in the business and legal side of franchising in NY. A designation of a business relationship as a franchise, immediately, requires obligations of the franchisor including disclosure and registration requirements. Our New York franchise lawyers shall be writing followup articles on franchise obligations under New York law over the next few weeks.
Definition of a Franchise in New York
Section 608 of the New York code defines a franchise in New York as:
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.”
This broad definition of a franchise, in New York, classifies any relationship that meets the following three requirements a franchise under New York’s Franchise Law.
- An agreement between parties that is either oral, implied or in writing;
- A franchisee is offered the right to “offer,” “sell” or “distribute” goods or services under a marketing plan or system; and
- A franchisee must pay a franchise fee.
- Franchisee is offered the right to “offer,” “sell” or “distribute” goods or services;
- A franchisee is offered the right to use the trademark or other designation of the goods or service; and
- A fee is paid by the franchisee.
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