The amended Rule exempts purely oral relationships that lack any written evidence of a material term of the franchise relationship or agreement, as a matter of policy, to avoid problems of proof in its enforcement. However, the exemption does not apply when there is any writing, even if unsigned, with respect to a material term, such as a purchase invoice for goods or equipment.
Petroleum Marketers and Resellers Exemption
The amended Rule expressly exempts petroleum marketers and resellers covered by the Petroleum Marketing Practices Act (“PMPA”). The most common types of franchises falling under this exemption are gasoline station franchises.
The PMPA exemption is intended to be read broadly. It covers not only gasoline stations, but other services and products – such as a repair center, car wash, or convenience store – sold to a prospective franchisee under the same, unified, franchise agreement as the gasoline station itself. However, the offer or sale of a convenience store or other franchise to an existing gasoline station franchisee under a separate franchise agreement is not exempt, and is, in fact, no different from the ordinary sale of a franchise to an existing franchisee.
This post is part of a series of posts discussing the legal aspects of franchising.
CREDIT: The content of this post has been copied or adopted from the Federal Trade Commission’s Franchise Rule Compliance Guide.