What Laws Regulate Franchising?

Franchising is regulated by both federal and state law, and these laws are on the books primarily to protect franchisees.

At the federal level, the FTC Franchise Rule imposes disclosure requirements that apply to the offer and sale of franchises. At the state level, Virginia law imposes registration and relationship laws.

Before being allowed to sell franchises in Virginia, franchisors must successfully navigate a substantive registration and review process.

Other provisions of Virginia’s Securities and Retail Franchising Act impose substantive restrictions on the legal relationship between franchisors and their franchisees.

For example, franchisees may not be terminated without reasonable cause, prospects must have an opportunity to negotiate most of the terms of the Franchise Agreement—these and other statutory provisions serve to protect franchisees and shift some risks back to the franchisor.

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