2023 New York Laws › GBS - General Business › Article 33 - Franchises › 684 - Exemptions.

§  684.  Exemptions. 1. The department of law is hereby authorized and
empowered to exempt by rule or  regulation  any  person,  franchise,  or
transaction  from  any  provision of section six hundred eighty-three of
this article or from any rule or regulation thereunder if the department
finds that such action is not inconsistent with the public  interest  or
the protection of prospective franchisees.
2.  The  department  of  law  may,  upon  application  and  within its
discretion, exempt from the registration  requirements  of  section  six
hundred  eighty-three  of this article the offer and sale of a franchise
if:
(a) The franchisor has a net worth on a consolidated basis,  according
to  its most recently audited financial statement, of not less than five
million dollars; or the franchisor has a net  worth,  according  to  its
most  recently audited financial statement, of not less than one million
dollars and is at least eighty percent owned by a corporation which  has
a  net  worth  on  a  consolidated basis, according to its most recently
audited financial statement, of not less than five million dollars; and
(b) The franchisor files with the department of law an application for
an exemption, on forms and in the manner prescribed by  the  department,
and  a  consent  to  service  of  process  on  the  form required by the
department; and
(c)  The  franchisor  discloses  in  writing   to   each   prospective
franchisee,   at  least  seven  days  prior  to  the  execution  by  the
prospective franchisee of any binding franchise or other  agreement,  or
at least seven days prior to the receipt of any consideration, whichever
occurs first, the following information:
(1) The name of the franchisor, the name under which the franchisor is
doing  or  intends  to  do  business,  and  the  name  of  any parent or
affiliated company that will engage in  business  transaction  with  the
franchisee.
(2)  The  franchisor's  principal  business  address  and the name and
address of its agent in this state authorized to receive process.
(3)  The  business  form  of  the   franchisor,   whether   corporate,
partnership, or otherwise.
(4)  Such  information concerning the identity and business experience
of persons affiliated with the franchisor as the department may by  rule
prescribe.
(5) The business experience of the franchisor, including the length of
time  the  franchisor  (i)  has  conducted  a business of the type to be
operated by franchisees, (ii) has granted franchises for such  business,
and (iii) has granted franchises in other lines of business.
(6) A copy of the typical franchise contract or agreement proposed for
use  and  in  use  in  this  state, including all amendments, deletions,
variations, and supplements thereto.
(7) A statement of the franchise fee charged, the proposed application
of the proceeds of such fee by the franchisor, and the formula by  which
the  amount  of  the fee is determined if the fee is not uniform and the
same in all cases.
(8) A statement describing any payments or fees other  than  franchise
fees that the franchisee is required to pay to the franchisor, including
royalties and payments or fees which the franchisor collects in whole or
in part on behalf of a third party or parties.
(9)  A statement of the conditions under which the franchise agreement
may be terminated or renewal refused, or repurchased at  the  option  of
the franchisor.
(10)  A  statement  as to whether, by the terms of the agreement or by
other device or practice, the franchisee is required  to  purchase  from
the franchisor or his designee services, supplies, products, fixtures or

other  goods relating to the establishment or operation of the franchise
business, together with a  description  and  the  terms  and  conditions
thereof.
(11)  A  statement  as  to  whether,  by  the  terms  of the franchise
agreement or by other device or practice, the franchisee is  limited  in
the goods or services offered by him to his customers.
(12)  A  statement  of  the  terms  and  conditions  of  any financing
arrangements when offered directly or indirectly by  the  franchisor  or
his agent or affiliate.
(13)  A  statement of any past or present practice or of any intent of
the franchisor to sell, assign, or discount to a third party  any  note,
contract, or other obligation of the franchisee in whole or in part.
(14) If any statement of estimated or projected franchisee earnings or
income is used, a statement of such estimate or projection and the data,
methods  and  computations  upon  which  such  estimate or projection is
based.
(15) A statement as to whether franchisees receive an  exclusive  area
or territory.
(16)  Other information related to the offer and sale of the franchise
as the department of law may reasonably require.
(d) Applications for exemptions shall be signed and  verified  by  the
franchisor  in  the  same  manner provided in the civil practice law and
rules for the verification of pleadings, and shall  be  filed  with  the
department of law at its office in the city of New York.
3. There shall be exempted from the registration provisions of section
six  hundred  eighty-three  of  this  article  the  offer  and sale of a
franchise if:
(a) (i) The franchisor has  a  net  worth  on  a  consolidated  basis,
according  to  its  most recent audited financial statement, of not less
than fifteen million  dollars;  or  the  franchisor  has  a  net  worth,
according  to  its  most recent audited financial statement, of not less
than three million dollars and is at least eighty  percent  owned  by  a
corporation  which has a net worth on a consolidated basis, according to
its most recent audited financial statement, of not  less  than  fifteen
million dollars; and
(ii)   The   franchisor  discloses  in  writing  to  each  prospective
franchisee,  at  least  seven  days  prior  to  the  execution  by   the
prospective  franchisee  of any binding franchise or other agreement, or
at least seven days prior to the receipt of any consideration, whichever
occurs first, such information as is  required  to  be  disclosed  under
subparagraph two of paragraph (c) of subdivision two of this section.
(b)  The  offer  or  sale  is  to  a  bank, savings institution, trust
company, insurance  company,  investment  company,  or  other  financial
institution, association, or institutional buyer, or to a broker-dealer,
where the purchaser is acting for itself or in some fiduciary capacity.
(c) The transaction is pursuant to an offer directed by the franchisor
to  not  more  than  two  persons,  other than persons specified in this
subdivision, if the franchisor does not grant the franchisee  the  right
to offer franchises to others, a commission or other remuneration is not
paid  directly  or indirectly for soliciting a prospective franchisee in
this state, and the franchisor is domiciled in this state or  has  filed
with the department of law its consent to service of process on the form
prescribed by the department.
(d)  The  offer  or  sale by a franchisor of a franchise to one of his
existing franchisees. This exemption shall apply where:
(i) the existing franchisee has actively operated a franchise  of  the
selling franchisor for the eighteen months preceding the offer; and
(ii)  the  existing  franchisee  purchases  the  franchise in order to
operate the business and not for the purpose of resale; and
(iii)  the franchisor reports the sale to the department of law on the
form required by the department within fifteen days of the sale.
4. The department of law may, in its discretion,  deny  or  revoke  an
exemption  with  respect  to  a  specific  franchisor or transaction, or
withdraw or further condition any exemption enumerated in this section.
5. The offer or sale of a  franchise  by  a  franchisee  for  his  own
account  or  the  offer  and sale of an entire area franchise owned by a
subfranchisor for his own account  is  exempted  from  the  registration
provisions of section six hundred eighty-three of this article if:
(a)  The  sale  is  an  isolated  sale  and  not  part  of  a  plan of
distribution of franchises; and
(b) The sale is not effected by or through a franchisor; and
(c) The franchisee furnishes to the prospective  purchaser,  at  least
one  week  prior  to  the  execution of any binding contract or purchase
agreement,  or  at  least  one  week  prior  to  the  receipt   of   any
consideration, whichever occurs first, a copy of the offering prospectus
of  the  franchisor  (including amendments, if any) currently registered
with the department of law.
A sale is not effected by or through a  franchisor  merely  because  a
franchisor has a right to approve or disapprove a different franchisee.
6. This article shall not be applicable to any transaction relating to
a  bank  credit  card  plan. "Bank credit card plan" means a credit card
plan in which the issuers of credit cards are only: banks  regulated  by
or  under  the  supervision  of  the  Federal Reserve Board; the Federal
Deposit Insurance Corporation; the Controller of  the  Currency  of  the
United  States;  or  the  Superintendent  of  Financial Services of this
state; or persons controlling such banks, provided that  the  assets  of
such  a  bank  or  banks  represent  a  majority  of  the  assets  on  a
consolidated basis of any holding company  system  of  which  such  card
issuers may be a party; or, persons controlled by such banks.