Publication Date

Spring 1981

Document Type

Article

Abstract

Since 1970, there has been an epidemic of state regulatory activity con­cerning the sale of franchises and business opportunities. In addition to those states which actually have adopted franchise regulation statutes, several state legislatures currently are considering pending legislation. Undoubtedly, other states, including Missouri, soon will have the opportunity to protect their un­suspecting citizens from the risks believed to be inherent in the franchising industry.

Nor has the franchising business gone unnoticed by the federal govern­ment. On December 21, 1978, the Federal Trade Commission (FTC) published its rule 436, entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures." This rule, by its terms, does not pre-empt state legislation, but it creates dual regulation of the franchise industry in those states which have enacted or yet may adopt similar controls. This article questions the necessity and desirability of establishing a mul­titude of regulatory schemes directed at the same business activity, where vari­ations in approach will require different (if not contradictory) compliance ef­forts by franchisors. Accordingly, this article will focus upon three primary topics: (1) an examination of FTC rule 436 and its history, including prior at­tempts to regulate franchises through the application of federal and state se­curities laws, (2) a comparison and evaluation of existing state franchise regu­lations and (3) arguments in support of legislative restraint for limited state regulation to supplement FTC rule 436.

Publication Title

University of Missouri Kansas City Law Review

Volume

49

Issue

3

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