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Georgia Passes Law Clarifying Franchises As Contractual Business Relationships

Written by Ken Gaebler
Published: 4/4/2012

The International Franchise Association (IFA) cites the new law as a model for franchise legislation in other states.

The International Franchise Association (IFA) has formally endorsed the Georgia General Assembly's unanimous passage of legislation that identifies the franchisee/franchisor relationship as a contractual business relationship -- rather than an employee/employer relationship.

Georgia Franchising Laws

When the bill is signed into law, Georgia will become the first state to pass this type of legislation. The law's passage comes on the heels of the IFA's efforts with the American Legislative Exchange Council (ALEC) to lobby for recognition of the contractual business nature of the franchise relationship.

The ALEC resolution (which formed the basis for Georgia's law) states that, "legislation or regulations which would improperly classify franchisees as 'employees' is a misinterpretation of labor and contract policy and deprives franchise investors of valuable economic opportunities."

"We applaud Georgia legislators for being the first state to formally recognize that the franchisee/franchisor relationship represents a contractual business relationship, not an employment relationship," said IFA Senior Vice President of Government Relations & Public Policy Judith Thorman.

"As a result of this law, franchising will continue to thrive as a growing economic force in the Georgia economy across many business lines including restaurants, hotels, automotive, health care, business and personal services, and real estate, among other business sectors."

Nationwide, franchising continue to be a popular path to entrepreneurship, but franchise buyers should keep in mind that buying a franchise does not ensure business success. Prospective franchisees should always do their due diligence on a franchise opportunity before signing a franchise contract.

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