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New study of franchise territories – it’s not law, but still interesting
A recent study conducted by Franchisegrade.com of the scope and extent of territorial protection granted by U.S. franchisors is of interest to anyone practising in this area, whether for franchisors or franchisees.
The study used as its source 654 franchise disclosure documents registered in 2015 with various state authorities, to which the public has open access. There is no such repository of disclosure documents available in Canada. Given the number of U.S. franchisors operating in Canada, and the similarity of principles that apply with respect to the granting of territories north and south of the border, this study is, I suggest, equally informative on the subject of territorial protection in Canada as it is in the U.S.
It’s worth noting that franchise regulation in the United States is far more scientific and advanced than in Canada. At the federal level, the Federal Trade Commission (FTC) devotes considerable resources to the study, analysis and regulation of franchising. Several years ago it promulgated its most recent update to its Franchise Rule, which was the result of several years of in-depth study, including a more than 400-page analysis written by the FTC staff and hundreds of hours of public hearings and written submissions. At the state level, 15 or so states regulate franchising through their respective securities commissions and the states have banded together through the conduit of the North American Securities Administrators Association to develop uniform rules for disclosure.