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This entry was published on 2014-09-22
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General Business (GBS) CHAPTER 20, ARTICLE 33
§ 681. Definitions. 1. "Advertisement" includes any written or printed
communication, or any communication by means of recorded telephone
messages or spoken on radio, television, or similar communications
media, published in connection with an offer or sale of a franchise.

2. "Department" means the department of law.

3. "Franchise" means a contract or agreement, either expressed or
implied, whether oral or written, between two or more persons by which:

(a) A franchisee is granted the right to engage in the business of
offering, selling, or distributing goods or services under a marketing
plan or system prescribed in substantial part by a franchisor, and the
franchisee is required to pay, directly or indirectly, a franchise fee,

(b) A franchisee is granted the right to engage in the business of
offering, selling, or distributing goods or services substantially
associated with the franchisor's trademark, service mark, trade name,
logotype, advertising, or other commercial symbol designating the
franchisor or its affiliate, and the franchisee is required to pay,
directly or indirectly, a franchise fee.

A franchise under this article shall not include any agreement,
contract, or franchise subject to the provisions of article eleven-B of
this chapter or section one hundred ninety-nine of this chapter, or any
agreement or contract for the sale of motor fuel.

4. A "franchisee" is a person to whom a franchise is granted.

5. A "franchisor" is a person who grants a franchise.

6. "Area franchise" means a contract or agreement between a franchisor
and a subfranchisor whereby the subfranchisor is granted the right, for
consideration given in whole or in part for such right, to sell or
negotiate the sale of franchises in the name or on behalf of the
franchisor; unless specifically stated otherwise, "franchise" includes
"area franchise".

7. "Franchise fee" means any fee or charge that a franchisee or
subfranchisor is required to pay or agrees to pay directly or indirectly
for the right to enter into a business under a franchise agreement or
otherwise sell, resell or distribute goods, services, or franchises
under such an agreement, including, but not limited to, any such payment
for goods or services. The following are not the payment of a franchise

(a) The purchase or agreement to purchase goods at a bona fide
wholesale price;

(b) The payment of a reasonable service charge to the issuer of a
credit card by an establishment accepting or honoring such credit card;

(c) Amounts paid to a trading stamp company by a person issuing
trading stamps in connection with the retail sale of merchandise or

(d) The purchase or lease, at fair market value, of real property or
agreement to so purchase or lease real property necessary to enter into
the business or to continue the business under the franchise agreement;

(e) The payment of a fee which on an annual basis does not exceed five
hundred dollars where the payor receives sales materials of an
equivalent or greater value than his payment;

(f) The purchase of sales demonstration equipment and materials
furnished at cost for use in making sales and not for resale;

(g) A lease, license or other agreement by a retailer permitting the
lessee, licensee or beneficiary to offer, sell or distribute goods or
services on or about the premises occupied by said retailer.

8. "Franchise sales agent" means a person who directly or indirectly
engages in the offer or sale of any franchise on behalf of another.
Franchisors, subfranchisors, and their employees are not to be
considered franchise sales agents.

9. "Franchise salesman" means each and every person employed by a
franchisor or franchise sales agent for the purpose of representing such
franchisor or franchise sales agent in the offer or sale of any

10. "Fraud," "fraudulent practice," and "deceit" are not limited to
common law fraud or deceit, and include:

(a) Any deception, concealment, suppression, device, scheme or
artifice employed by a franchisor, franchise sales agent, subfranchisor
or franchise salesman to obtain any money, promissory note, commitment
or property by any false or visionary pretense, representation or

(b) Any material misrepresentation in any registered prospectus filed
under this article; or

(c) The omission of any material fact in any registered prospectus
filed under this article.

11. "Offer" or "offer to sell" includes any attempt to offer to
dispose of, or solicitation of an offer to buy, a franchise or interest
in a franchise for value. The terms "offer" and "offer to sell" do not
include the renewal or extension of an existing franchise where there is
no interruption in the operation of the franchised business by the

12. (a) An offer or sale of a franchise is made in this state when an
offer to sell is made in this state, or an offer to buy is accepted in
this state, or, if the franchisee is domiciled in this state, the
franchised business is or will be operated in this state.

(b) An offer to sell is made in this state when the offer either
originated from this state or is directed by the offeror to this state
and received at the place to which it is directed. An offer to sell is
accepted in this state when acceptance is communicated to the offeror
from this state.

(c) An offer to sell is not made in this state merely because a
publisher circulates or there is circulated on his behalf in this state
a bona fide newspaper or other publication of general, regular and paid
circulation which has had more than two-thirds of its circulation
outside this state during the past twelve months, or a radio or
television program originating outside this state is received in this

13. "Person" means an individual, corporation, partnership, joint
venture, association, company, trust, unincorporated organization or
other entity and shall include any other person that has a substantial
interest in or effectively controls such person, as well as the
individual officers, directors, general partners, trustees or other
individuals in control of the activities of each such person.

14. "Publish" means publicly to issue or circulate by newspaper, mail,
radio or television, or otherwise to disseminate to the public.

15. "Sale" or "sell" includes every contract or agreement of sale,
contract to sell, or disposition of, a franchise or interest in a
franchise for value.

16. "State" means any state, territory, or possession of the United
States, the District of Columbia and Puerto Rico.

17. "Subfranchisor" means a franchisee who has the right to sell or
subdivide his franchise to another or others, known as "subfranchisees,"
while having and retaining all or part of the franchisor's interest or
rights under franchise agreements with such subfranchisee. Under this
article and in this situation, the subfranchisee shall be considered the
franchisee, and both the principal franchisor and the subfranchisor
shall be considered the franchisor.

18. In any proceeding under this article, the burden of proving an
exemption or an exception from a definition is upon the person claiming