N.Y. General Business Law § 681: Definitions

§ 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,

or

(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

fee:

(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

services;

(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

franchise.

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

promise;

(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

franchisee.

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

state.

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

it.