§ 681 — Definitions

§ 681. Definitions. 1. "Advertisement" includes any written or printed\ncommunication, or any communication by means of recorded telephone\nmessages or spoken on radio, television, or similar communications\nmedia, published in connection with an offer or sale of a franchise.\n 2. "Department" means the department of law.\n 3. "Franchise" means a contract or agreement, either expressed or\nimplied, whether oral or written, between two or more persons by which:\n (a) A franchisee is granted the right to engage in the business of\noffering, selling, or distributing goods or services under a marketing\nplan or system prescribed in substantial part by a franchisor, and the\nfranchisee is required to pay, directly or indirectly, a franchise fee,\nor\n (b) A franchisee is granted the right to engage in the business of\noffering, selling, or distributing goods or services substantially\nassociated with the franchisor's trademark, service mark, trade name,\nlogotype, advertising, or other commercial symbol designating the\nfranchisor or its affiliate, and the franchisee is required to pay,\ndirectly or indirectly, a franchise fee.\n A franchise under this article shall not include any agreement,\ncontract, or franchise subject to the provisions of article eleven-B of\nthis chapter or section one hundred ninety-nine of this chapter, or any\nagreement or contract for the sale of motor fuel.\n 4. A "franchisee" is a person to whom a franchise is granted.\n 5. A "franchisor" is a person who grants a franchise.\n 6. "Area franchise" means a contract or agreement between a franchisor\nand a subfranchisor whereby the subfranchisor is granted the right, for\nconsideration given in whole or in part for such right, to sell or\nnegotiate the sale of franchises in the name or on behalf of the\nfranchisor; unless specifically stated otherwise, "franchise" includes\n"area franchise".\n 7. "Franchise fee" means any fee or charge that a franchisee or\nsubfranchisor is required to pay or agrees to pay directly or indirectly\nfor the right to enter into a business under a franchise agreement or\notherwise sell, resell or distribute goods, services, or franchises\nunder such an agreement, including, but not limited to, any such payment\nfor goods or services. The following are not the payment of a franchise\nfee:\n (a) The purchase or agreement to purchase goods at a bona fide\nwholesale price;\n (b) The payment of a reasonable service charge to the issuer of a\ncredit card by an establishment accepting or honoring such credit card;\n (c) Amounts paid to a trading stamp company by a person issuing\ntrading stamps in connection with the retail sale of merchandise or\nservices;\n (d) The purchase or lease, at fair market value, of real property or\nagreement to so purchase or lease real property necessary to enter into\nthe business or to continue the business under the franchise agreement;\n (e) The payment of a fee which on an annual basis does not exceed five\nhundred dollars where the payor receives sales materials of an\nequivalent or greater value than his payment;\n (f) The purchase of sales demonstration equipment and materials\nfurnished at cost for use in making sales and not for resale;\n (g) A lease, license or other agreement by a retailer permitting the\nlessee, licensee or beneficiary to offer, sell or distribute goods or\nservices on or about the premises occupied by said retailer.\n 8. "Franchise sales agent" means a person who directly or indirectly\nengages in the offer or sale of any franchise on behalf of another.\nFranchisors, subfranchisors, and their employees are not to be\nconsidered franchise sales agents.\n 9. "Franchise salesman" means each and every person employed by a\nfranchisor or franchise sales agent for the purpose of representing such\nfranchisor or franchise sales agent in the offer or sale of any\nfranchise.\n 10. "Fraud," "fraudulent practice," and "deceit" are not limited to\ncommon law fraud or deceit, and include:\n (a) Any deception, concealment, suppression, device, scheme or\nartifice employed by a franchisor, franchise sales agent, subfranchisor\nor franchise salesman to obtain any money, promissory note, commitment\nor property by any false or visionary pretense, representation or\npromise;\n (b) Any material misrepresentation in any registered prospectus filed\nunder this article; or\n (c) The omission of any material fact in any registered prospectus\nfiled under this article.\n 11. "Offer" or "offer to sell" includes any attempt to offer to\ndispose of, or solicitation of an offer to buy, a franchise or interest\nin a franchise for value. The terms "offer" and "offer to sell" do not\ninclude the renewal or extension of an existing franchise where there is\nno interruption in the operation of the franchised business by the\nfranchisee.\n 12. (a) An offer or sale of a franchise is made in this state when an\noffer to sell is made in this state, or an offer to buy is accepted in\nthis state, or, if the franchisee is domiciled in this state, the\nfranchised business is or will be operated in this state.\n (b) An offer to sell is made in this state when the offer either\noriginated from this state or is directed by the offeror to this state\nand received at the place to which it is directed. An offer to sell is\naccepted in this state when acceptance is communicated to the offeror\nfrom this state.\n (c) An offer to sell is not made in this state merely because a\npublisher circulates or there is circulated on his behalf in this state\na bona fide newspaper or other publication of general, regular and paid\ncirculation which has had more than two-thirds of its circulation\noutside this state during the past twelve months, or a radio or\ntelevision program originating outside this state is received in this\nstate.\n 13. "Person" means an individual, corporation, partnership, joint\nventure, association, company, trust, unincorporated organization or\nother entity and shall include any other person that has a substantial\ninterest in or effectively controls such person, as well as the\nindividual officers, directors, general partners, trustees or other\nindividuals in control of the activities of each such person.\n 14. "Publish" means publicly to issue or circulate by newspaper, mail,\nradio or television, or otherwise to disseminate to the public.\n 15. "Sale" or "sell" includes every contract or agreement of sale,\ncontract to sell, or disposition of, a franchise or interest in a\nfranchise for value.\n 16. "State" means any state, territory, or possession of the United\nStates, the District of Columbia and Puerto Rico.\n 17. "Subfranchisor" means a franchisee who has the right to sell or\nsubdivide his franchise to another or others, known as "subfranchisees,"\nwhile having and retaining all or part of the franchisor's interest or\nrights under franchise agreements with such subfranchisee. Under this\narticle and in this situation, the subfranchisee shall be considered the\nfranchisee, and both the principal franchisor and the subfranchisor\nshall be considered the franchisor.\n 18. In any proceeding under this article, the burden of proving an\nexemption or an exception from a definition is upon the person claiming\nit.\n