I had the opportunity to attend the Forum on Franchising in Baltimore this past month. The Forum Chair, Joseph Fittante, was recently interviewed by BlueMauMau on the state of franchise law which I thought was important to share.
Fittante commented that he is seeing more high stakes litigation. In his experience the number of litigation cases are decreasing but more of those cases are going longer than before. (That’s my experience as well by the way, so if you are a franchisee looking to end an agreement or recover damages, you can expect a strong fight from the franchisor).
Fittante also mentioned the significance of the KFC case decided by the Iowa Supreme Court. The Iowa Supreme Court ruled that a foreign corporation could be taxed on revenues received from the state of Iowa even though the company had no physical presence within the state of Iowa but rather received royalty revenues resulting from intangible property (i.e. the use of trademarks and licenses to franchisees) within the state. Fittante expects that more states will look to raise additional revenues through similar taxation methods or through the misclassification of franchisees as independent contractors v. employees.
Finally, Fittante also said he doesn’t believe we will see a federal franchise relationship law that governs the franchisor-franchisee relationship but that will continue to be controlled by state law. He has a point that it’s nice to know what the rules are rather than have ambiguity which happens when state laws vary so widely.
Overall, I was impressed by the presentations at this year’s Forum. Hats off to Fittante and many others for their hard work!