Franchise and Distribution Law

Franchisors, manufacturers and others who use third party relationships as a distribution mechanism nationally or internationally face a myriad of legal issues in pursuing their business goals. The Duane Morris Franchise and Distribution Practice Group is a multidisciplinary team of attorneys with extensive experience in working with all aspects of vertical distribution and all vertical distribution formats, including franchising; dealership and distributorship programs; sales representative and commercial agency relationships; commercial licensing and co-branding arrangements; management agreement formats; and direct selling and business opportunity relationships. Our lawyers help business clients comply with regulatory, statutory and other legal mandates through practical, creative and focused legal counsel. The Franchise and Distribution Group shares its clients' entrepreneurial focus and delivers responsive representation.

Range of Services

New Programs: Structuring, Documentation and Compliance

Our transactional attorneys have structured, documented and implemented vertical programs for clients large and small, from startup businesses seeking to expand to large multinational corporations looking to use vertical distribution as a mechanism to market a particular product or service or to expand into a certain market. Our services for these clients include:

• Counseling. With or without independent consultants, our lawyers work with management to analyze our clients' options from both a legal and a business perspective and develop recommendations for the appropriate vertical distribution format, taking into consideration both legal risks and the risks and benefits associated with timing, costs and results.
• Compliance Analysis. We provide comprehensive domestic and international counseling as to the application, ramifications and avoidance of the various United States and foreign laws governing the grant of vertical distribution rights, including those applicable to franchises, business opportunities and direct sales programs, including technology transfer laws.
• Documentation. Duane Morris attorneys draft and prepare agreements and collateral documentation that are appropriately tailored in style, form and content to facilitate our clients' business objectives. Our integrated approach also includes the preparation of compatible collateral documents, such as financing agreements, real estate documentation, supply agreements and software and e-commerce agreements.
• Registration/Disclosure Strategies. Regardless of the vertical distribution structure elected, Duane Morris attorneys provide and implement compliance programs covering registration, disclosure, filing and sales practices requirements governing the grant of vertical distribution rights in the United States and abroad, along with ongoing training, advisory and compliance services and programs to guide our clients' business practices.

Existing Vertical Distribution Relationships

Our multidisciplinary approach to the practice of Franchise and Distribution law makes Duane Morris highly qualified to provide integrated advice, counsel and assistance to our clients in the ongoing maintenance of their vertical distribution programs, as well as in the positioning of those programs for future strategic advantage and competition. Our services include:

• Registration/Disclosure. Duane Morris provides ongoing registration and disclosure compliance for franchisors and business opportunity sellers that involves more than annual and material update filings backed up by a docket system. Our attorneys stay involved with our clients and their businesses to advise and assist in this process, to help identify material changes and to assure an integrated and well-reasoned approach to the ongoing registration/disclosure process. For direct sellers, identification of and compliance with filing and/or notice requirements is equally critical.
• Franchise Classification Avoidance. For those of our clients who choose a non-franchised vertical distribution program, avoidance of classification as a franchise and/or business opportunity is essential. Not only do we regularly counsel on application of these laws and avoidance of their application, we also provide compliance plans for the ongoing conduct of business and, as appropriate, seek interpretive opinions for our clients' benefit.
• Relationship Maintenance. The ongoing conduct of a vertical distribution relationship can impact areas beyond the franchise and dealer relationship laws and special industry regulation. Among the areas in which we regularly provide our clients creative and integrated advice are:
  • Antitrust and Trade Practices. Our antitrust and trade regulation attorneys provide vertical antitrust counseling and compliance programs in areas as diverse as pricing, the Robinson-Patman Act, tying, exclusive dealing, use of intellectual property, and unfair and deceptive practices generally, including for those clients with dominant market positions.
  • Franchise Advertising and Recruitment Practices; Earnings Claims. Franchisors recruit franchisees and offer and sell franchises in a heavily regulated environment. We not only review their advertising, Web sites, marketing materials and sales strategies for general compliance with law, we also review for compliance with the restrictions of the franchise laws and compliance with laws governing the making of earnings claims.
  • Commercial Support. Commercial considerations underlying vertical distribution often can be as significant as the program's structure. These include domestic and cross-border aspects of systemwide sourcing and sale of goods and services, pricing and discounts, warranty and compliance with consumer warranty and protection laws, customs and trade and other issues.
  • Cooperative Supply and Advertising. Maintenance of cooperative purchasing and selling programs, advertising funds and approved supplier programs.
  • Associations. Relationship management with franchisee and dealer associations.
  • Advertising and Marketing Practices. In addition to franchise-specific regulation, we provide advertising and marketing practices review and counseling, including compliance with laws governing unfair and deceptive sales and trade practices, comparative advertising and promotional programs.
  • Encroachment. Management of encroachment, channel of distribution and implied covenant of good faith and fair dealing issues generally.
  • Contracts and Common Law. Integrated with the above disciplines, insight into the contractual and common law issues impacting ongoing management of vertical programs.
  • Tax. Not only do our international, federal, state and local tax attorneys provide valuable ongoing tax advice and information to our clients, they have experience representing vertical distribution companies and work closely with us to assure that our transactions are structured in a tax advantageous manner.
  • Intellectual Property. In supporting our clients' business expansion and branding initiatives, our patent and trademark lawyers not only maintain our clients' domestic and international trademark and patent portfolios, they also advise on general marketing practices and advertising issues and enforce our clients' rights to be free of intellectual property infringement.
• Financing Capabilities and System Support. Our attorneys also offer significant experience in financing of franchisors and vertical distribution programs, structuring and implementing manufacturer- and franchisor-sponsored or arranged financing programs for the vertical network, and financing for special industry structures, including floor planning. We have also developed and assisted the implementation of targeted franchisee and dealer support and redevelopment programs.
• Program Redevelopment. No vertical distribution program is static. Each changes in response to market and competitive conditions. Our attorneys bring their collective experience to the process of restructuring and adapting relationships to balance business objectives with the risk of legal challenge.

Termination, Non-Renewal and System Change Counseling

Whether on an individual, class or systemwide basis, we regularly advise our clients on compliance with the franchise, fair dealership, special industry, sales representative and other laws restricting the right to terminate, not renew, change competitive circumstances of or otherwise maintain and change a vertical distribution relationship. We also regularly advise our clients on the ability of a franchisor or seller to impose system changes on its vertical distribution system and/or make market withdrawals.

Mergers and Acquisitions, Private Equity and Venture Capital

Duane Morris' corporate lawyers represent clients in transactions involving franchisors, franchisees and/or vertical distribution systems, including:

• Acquisition and divestiture of publicly held and private companies, whether the transaction takes the form of an asset or stock purchase or sale, merger, joint venture or other business combination;
• Acquisition of competitors and synergetic programs, as well as acquisition of franchisees, dealers and distributors;
• Assessment of merger or acquisition opportunities;
• Private equity and venture capital investments; and
• Public offerings of debt or equity, initial or secondary, representing both issuers and underwriters.

Our Cross-Border Practice Capabilities

Our international client base, like our Franchise and Distribution Law practice, is extremely diverse. Duane Morris represents clients from all over the world with business interests and vertical distribution networks spanning the globe. Our clients range from established blue chip companies to startup entrepreneurs; from publicly traded companies to family-owned businesses; from major institutional investors to governmental authorities to private clients. Our Franchising and Distribution attorneys have represented major U.S.-based franchisors in granting franchising rights in most jurisdictions in the world, foreign-based franchisors granting franchises in the United States and abroad, and sellers with dealership, distributorship, direct selling and sales representative networks around the world in transactions from the simplest grant of rights to sophisticated transactions with joint venture underlays. In addition to our relationships with local counsel around the world, Duane Morris is a member of two prominent international affiliations of attorneys, giving the firm the capability to select and engage the appropriate local counsel to meet our clients' needs in more than 100 jurisdictions worldwide.

While Duane Morris is headquartered in the United States, many of our attorneys are qualified to practice law in other countries. We assist our clients around the world with projects in areas as diverse as customs and international trade, global employment relations, immigration, global product branding and patent protection, international tax planning, international wealth preservation, worldwide regulatory compliance, international dispute resolution, and compliance with the restrictions governing the conduct of business around the world by United States entities generally.

Domestic and International Litigation, Arbitration and ADR

Vertical distribution relationships are inherently dispute ridden, particularly at the end of the relationship. Our trial attorneys are experienced in helping clients resolve disputes in areas as diverse as termination litigation; defense of FTC, state and other investigations; RICO, antitrust and unfair trade practices; fraud; vicarious liability; and enforcement of noncompetition provisions. They represent clients in class action and multidistrict matters, arbitration and other forms of alternative dispute resolution. Perhaps more important, our litigators work closely with our Franchising and Distribution Group to attempt to settle matters prior to the institution of formal proceedings when in the best interest of our clients and to structure internal dispute resolution programs to minimize the risk of litigation. Duane Morris attorneys also have international arbitration and dispute resolution capability to assist our clients in resolving cross-border disputes as they arise.

Reorganization and Restructuring

Duane Morris bankruptcy lawyers practice in many of the country's major business and financial centers, including our offices in New York, Chicago, Philadelphia, San Diego, San Francisco, Boston, Atlanta, Miami, Pittsburgh, Newark and Wilmington, Delaware, the nation's corporate law capital. Our attorneys are positioned at the heart of all major developments in bankruptcy law involving vertical distribution, including enforcement of bankruptcy termination clauses, assignment and assumption matters, automatic stay issues, assumption and rejection issues, claims payment and managing issues arising out of the use of special committees. Both Duane Morris' national presence and its collective experience in vertical distribution provide our clients seamless and consistent delivery of legal services throughout the United States in bankruptcy and insolvency matters involving vertical distribution networks.

For Additional Information

For more information on the Duane Morris Franchise and Distribution Group, please contact any of the practice members referenced on the Attorney Listing.