Franchise enforcement in Illinois

It is important for businesses to understand franchise law in Illinois. If the laws are not correctly followed, the sale, purchase or registration of a franchise may be prohibited, denied, terminated or suspended until the business becomes compliance.

The enforcement provision outlines when the penalties may be applied. Actions against a franchise may be enforced when the administrator finds that the business has failed to comply with any provision of the Franchise Act, if there are any included fraudulent or misleading statements on the disclosure statement or amendments to it or if the administrator finds the disclosure statement is materially deficient.

A disclosure statement is considered to be materially deficient under several different circumstances. It will be considered materially deficient if it does not comply with section 16 of the act, and if the sale would represent a misrepresentation, fraud or deceit on prospective franchisees. Furthermore, if any person has engaged or is about to engage in deceptive practices or if any officer has been convicted of a crime or is involved in a civil lawsuit that would place the franchise at risk for the potential franchisees, the disclosure statement may be deemed deficient. Finally, if the franchisor's method of doing business would be illegal if performed, penalties may be applied.

When businesses are considering selling franchises, it is vital that the business franchisors have a full understanding of the requirements of Illinois's Franchise Act. Failing to comply with any of its provisions may result in the prohibition or denial of the franchise. Similarly, when a business is considering acquiring a franchise, they also need to be aware of all of the legal requirements in order to make certain the franchisor's documents and business methods comply with the law. Businesses may benefit by reviewing their franchise documents and business methods with a business law attorney.

Source: Illinois General Assembly, " Sec. 22. Enforcement. ", November 12, 2014

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