cbareport_May13 - page 8

8
l
May 2013 CBA REPORT
feature article
Franchisees and Franchisors Benefit from the
2012 Amendments to Ohio’s
Business Opportunity
Plan Law
I
I
n 1979, Ohio adopted the Ohio
Business Opportunity Plan Law,
Ohio Revised Code Sections
1334.01
et seq.
(the “OBOPL”). This Act
regulates the sale of franchises and other
business opportunities within Ohio.
This article uses “franchises” to refer to
both. Notably, the Act provides fran-
chisees with a private right of action and
strong remedies where the franchisor
violates the requirements of the Act.
In June 2012, Ohio adopted several
amendments to OBOPL. The amend-
ments make significant changes to the
private right of action and remedies.
Some changes benefit franchisees. Oth-
ers benefit franchisors. The amendments
also clarify and expand the reach of
OBOPL. This article describes the 2012
amendments.
A. Ohio’s Business
Opportunity Plan Law
Ohio adopted the OBOPL in 1979
as part of the nationwide movement in
the 1970s to regulate franchising. In
1978, the Federal Trade Commission had
adopted a trade regulation rule requiring
franchisors to provide detailed disclosure
documents to prospective franchisees.
The FTC rules does not provide franchi-
sees with a private right of action. Many
other states adopted laws regulating the
sale of franchises. Some state laws re-
quire the franchisor to provide disclosure
documents to the prospective franchisee.
Other state laws regulate the franchise
relationship, including by prohibiting
termination without cause, requiring
a specified notice for termination, or
requiring a buy back of inventory upon
termination.
The OBOPL regulates the sale of
traditional business opportunities. Ex-
amples include arrangements whereby
a seller provides goods or services to a
buyer and assists the buyer in finding
locations for rack displays or vending
machines where such goods or services
are sold. The Act, however, is not limited
to traditional business opportunities.
The definition of “business opportu-
nity plan” adopted in 1979 includes any
agreement to obtain the right to sell
goods or services, whereby (a) the goods
or services are supplied by the seller
of the business opportunity, a recom-
mended third party, or an affiliate of the
seller, (b) the purchaser is required to
make an initial payment of between $500
and $50,000, and (c) the seller makes a
specified representation, such as “there
is a market for the goods or services.”
Ohio Revised Code § 1334.01(D). The
OBOPL does not use the word franchise.
Nonetheless, the legislature clearly in-
tended and Ohio courts consistently have
interpreted the Act to apply to the sale of
franchises in Ohio.
Peltier v. Spaghetti
Tree, Inc.
, 6 Ohio St. 3d 194, 451 N.E. 2d
1219 (1983);
6100 Cleveland, Inc. v. Staff
Builders, Int’l, Inc.
, 127 F. Supp. 2d 877
(N.D. Oh. 1999).
The OBOPL contains four basic
requirements. The franchisor must pro-
vide a statutorily prescribed disclosure
statement to the prospective franchisee
at least ten days prior to execution of the
agreement selling or leasing the fran-
chise. Ohio Revised Code § 1334.02.
The franchisor must provide prominent
notice in the manner prescribed in the
statute of the franchisee’s right to cancel
without penalty during a five-day “cool-
ing off ” period following the signing
of the agreement.
Id
. at § 1334.06. In
addition, the franchisor (i) must provide
a written agreement containing certain
prescribed terms and (ii) must not make
any false or misleading statements or en-
gage in deceptive or unconscionable acts
or practices.
Id.
at §§ 1334.03, 1334.06.
Ohio, unlike certain other states, does
not place limitations upon the franchi-
sor’s right to terminate the franchise
relationship.
The OBOPL contains many ex-
emptions and other limitations on the
coverage of the Act. As adopted in 1979,
franchisors that “fully comply” with the
FTC rule were exempt from nearly all of
the Act’s requirements. The Act contains
other exemptions, including, for “large
franchisors”, “experienced franchisees”,
and where the initial payment required
from the franchisee exceeded a specified
amount.
In contrast to the FTC rule that does
not include a private right of action, the
OBOPL accords franchisees powerful
remedies where the franchisor violates
the statute. These include the right to
rescind the transaction, to recover three
times the amount of actual damages, and
to recover a reasonable attorney fee.
Id
.
at § 1334.09. Thus, the ODOPL offers im-
portant protections to Ohio franchisees.
By Jack Donson and Margaret Lawson
1,2,3,4,5,6,7 9,10,11,12,13,14,15,16,17,18,...36
Powered by FlippingBook