Recent Developments in Franchising: A Mix of Influences

The California Secretary of State's office received over 1 million signatures, which are probably sufficient to qualify a question for the general election on AB 257. In order to establish minimal standards for health, safety, and employment across the California fast food sector, AB 257 was approved.

The FAST Act would establish a council of 10 members made up of state representatives, labor representatives, and employer representatives. The Council would determine fast food workers' minimum salaries, working conditions, and hours. The Council may raise the state's minimum wage for workers in fast food establishments to as much as $22 per hour in 2023. Franchise and restaurant organizations opposed AB 257 because they believed it would unjustly harm eateries. Due to current economic difficulties and the industry's recovery from the COVID-19 epidemic, many were more likely to close.

The gathered signatures should be greater than the amount necessary to put AB 257 on hold. The "Save Local Restaurants" alliance stated that they are certain that AB 257 will be repealed and placed on the ballot in November 2024. The bill would take effect on January 1, 2023, according to the California Department of Industrial Relations, whose process of authenticating submitted signatures is still ongoing. The alliance argues that it would be unusual to let the law take effect while petitions for an opposing referendum are being collected. The group filed a lawsuit to prevent AB 257 from taking effect while the referendum is still open. On this, more will follow.

NASSA Policy on Questionnaires and Acknowledgements

A Statement of Policy Regarding the Use of Franchise Questionnaires and Acknowledgements was endorsed by the North American Securities Administrators Association (NASAA) during its fall annual meeting. To provide guidelines for the appropriate application of surveys and acknowledgments in franchise offerings, the statement of policy was created. According to NASAA, franchisors make use of surveys and acknowledgments to refute charges of fraud and deception throughout the franchise sales process. The Statement of Policy forbids a franchisor and its franchise salespeople from asking potential franchisees to answer questions or provide any written responses that are frivolous, unreasonable, or that:

1. Lead a sensible potential franchisee to give up—or lead them to believe they have given up—rights to which they are legally entitled under federal or state law.

2. Would have the effect of transferring to the prospective franchisee the franchisor's disclosure obligations under federal or state law in any questionnaires, acknowledgements, or similar documents that are subjective or unreasonable, or that.

3. Are comparable to the prohibited statements or are otherwise prohibited statements under this statement of policy.

Eleven categories of remarks are classified as "prohibited statements" in surveys, acknowledgments, and other comparable papers under the Statement of Policy. An anti-waiver clause must also be included in the statement of policy.

Massachusetts independent contractor law inapplicable to 7-Eleven franchisees

The Massachusetts Independent Contractor Law (ICL) does not apply to 7-Eleven franchise owners since they do not provide services to 7-Eleven, Inc., according to a decision by a federal court in Boston. A class action lawsuit was filed by a number of 7-Eleven franchisees who claimed that the franchisor had wrongly classified their franchisees as independent contractors rather than employees in violation of the Independent Contractor Statute. Whether the three-prong test for independent contractor status set forth in [the independent contractor statute] applies to the relationship between a franchisor and its franchisee, where the franchisor must also comply with the FTC Franchise Rule," the federal court's question was posed to the Massachusetts Supreme Court. The Massachusetts Supreme Court ruled that the FTC Franchise Rule's disclosure requirements for the franchisor did not conflict with the state's independent contractor statute's application to the franchisor-franchisee relationship.

On the basis of such directions, the district court determined on remand that 7-Eleven did not compensate the franchisees for the fulfillment of any purported responsibilities. Due to the fact that 7-Eleven offers franchisees services in exchange for franchise fees, it was determined that the contrary is true. As a result, class certification was rejected, and the franchisor was entitled to summary judgment on the labor law misclassification allegations.