Top 5 Government Changes Affecting Franchisees in 2007

2007 turned out to be a pivotal year in the ongoing relationship between government and franchising. Here are the top government laws and initiatives affecting franchisees from the year that has just gone by.

1. The Franchise Rule Is Finally Updated. Approaching the third decade after the Federal Trade Commission found it necessary to launch the Franchise Rule to help stem the wild pie-in-the-sky claims to franchise prospects by franchisors, the FTC has finally updated its disclosure guidelines. What's in the upgrade? Longer waiting times after reading the disclosure document and expanded disclosure, that's what. Franchisors could volunteer to follow the new guidelines as of July 1, 2007, but by July 1, 2008, the new codes must be followed.

2. Rhode Island Issues Fair Dealership Act. After many years of absence, states burst on the scene with various unsuccessful fair franchise bills. But on June 14, Rhode Island issued one of the first franchise relationship laws by a State in years. The act is meant to protect franchisees and dealers from unfair terminations, renewals and agreement amendments. Franchisee attorney Michael Garner of Dady & Garner P.A. states, "Last time such a legislation was enacted in the states was in 1992 in Iowa and amended and reenacted in 2000."

3. Trans Fat Ban by New York City. New York City banned restaurants from using trans fat in frying oils starting in July 2007 and also banned it from food served in the Big Apple's restaurants beginning in July 2008. Wendy's, KFC, McDonalds, Burger King, IHOP and many other franchise chains quickly announced they were testing or implementing non trans fat food nationwide shortly after.

4. SBA Patriot Loan Express. The Small Business Administration launched a streamlined loan program of up to $500,000 aimed at veterans and their widows who launch a franchise or other business.

5. Rise in Minimum Wage. The federal government signed on to raise the minimum wage, the first increase in a decade. Wages went up starting in 2007 with increases each summer until 2009, when all minimum wage jobs will be at least $7.25 an hour. States also jumped on this 2007 bandwagon with their own minimum wage increases.

Finally, here are honorable mentions of government activities concerning franchising changes in 2008 that we will be watching.

• Canada Is Bubbling with New Franchise Rules. Our neighbors to the north have been busy when it comes to government involvement in franchising. As guest columnist Stan Turkel observes, "From Alberta to Ontario, to Prince Edward Island, to New Brunswick, to Manitoba there are new franchise rules being considered."

• Arbitration Fairness Act of 2007. This bill has not been enacted and is actually just in the early stage of being studied by the House Judiciary Subcommittee. If enacted, the new law would prevent franchisees from giving up their right to sue because their agreements specify that they must enter arbitration instead. It is something to be watched in 2008.