Franchise Relationship Law

Franchise relationship laws are state-level statutes that govern the ongoing relationship between franchisors and franchisees after the franchise agreement is signed, providing protections beyond what the FTC Franchise Rule covers. Currently, 22 states have some form of franchise relationship legislation. These laws typically address: good cause requirements for termination, cure periods for alleged defaults, rights of first refusal on sale or transfer, restrictions on non-compete clauses, encroachment protections, and freedom of association (the right to form franchisee associations). Unlike the FTC rule (which focuses on pre-sale disclosure), relationship laws govern the day-to-day franchise relationship and provide franchisees with legal remedies when franchisors act in bad faith.