Statutory Prohibitions Protections

Most states regulate the relationship between manufacturers and distributors in certain industries, such as motor vehicle or petroleum product sales, and many regulate the relationship between franchisors and franchisees in other businesses as well. Legislatures enacting franchise and distribution laws act on the basis of a shared recognition that prospective franchisees often face significant initial investment decisions without adequate information and come from a position of little, if any, meaningful bargaining power. As a result, registration and disclosure requirements exist in many states to protect prospective franchisees at the outset of the franchise relationship. Most of these laws require franchisors to disclose specific information directly to prospective franchisees, and many additionally direct franchisors to register and file documents with the appropriate state agency or authority. Some states also regulate the franchise or distribution relationship after its inception because legislatures perceive that the inequities of the franchise relationship extend beyond initial disclosures. Statutes requiring franchisors to...