Since at least 2008 the authors of this article have noted and expressed their collective concern about the antiquated state of New York’s 1981 franchise law, which has never been amended for consistency with other state or federal franchise laws. New York prides itself on being the world’s center of trade, finance, and culture, but the New York Franchise Sales Act (NYFSA) discourages international franchising in New York. Thomas M. Pitegoff, “How New York Can Be a Center for International Franchising” (New York Bar Association NY Business Law Journal, Summer 2020, Vol. 24, No. 1). And the NYFSA falls short in specifically defining a franchise in a manner that avoids ensnaring the unknowing parties to almost any brand license or other commercial agreement involving a marketing plan and a fee, e.g., distribution and supply agreements.
The authors believe that the NYFSA should be amended and updated to address the issues noted above. The suggested amendments would address the two anomalous aspects of the NYFSA, namely: (1) with regard to out of state sales, to remove the requirement that New York based franchisors must register their franchise offerings for sales to prospective franchisees located in other states and countries, which is contrary to the Model Franchise Investment Act adopted by the North American Securities Administrators Association (NASAA); and (2) with regard to the definition of “franchise,” to amend the NYFSA definition to avoid converting every trademark license agreement to a “franchise” and make New York’s law consistent with the accepted “franchise” definition in every other state that regulates franchise sales, as well as NASAA’s Model Franchise Sales Act and the Federal Trade Commission’s trade regulation rule on franchising (the FTC Rule).
