New York Laws
Article 33 - Franchises
683 - Disclosure Requirements.

(a) 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 transactions with
franchisees.
(b) The franchisor's principal business address and the name and
address of its agent in this state authorized to receive process.
(c) The business form of the franchisor, whether corporate,
partnership, or otherwise.
(d) Such information concerning the identity and business experience
of persons affiliated with the franchisor as the department of law may
by rule prescribe.
(e) A statement as to whether the franchisor and its principals,
officers, partners, directors, or any other person identified in the
application for registration:
(1) Has been convicted of a felony, or pleaded nolo contendere to a
felony charge, or held liable or enjoined in a civil action by a final
judgment if such civil action involved fraud, embezzlement, fraudulent
conversion or misappropriation of property.
(2) Is subject to any currently effective order of the United States
securities and exchange commission or the securities administrator of
any state denying the registration of or barring, revoking or suspending
the registration of such person as a securities broker or dealer, or
investment advisor, or securities agent or registered representative, or
is subject to any currently effective order of any national securities
association or national securities exchange, as defined in the
Securities and Exchange Act of 1934, suspending or expelling such person
from membership in such association or exchange.
(3) Is subject to a currently effective order or ruling of the federal
trade commission.
(4) Is subject to any currently effective injunctive or restrictive
order relating to business activity as a result of an action brought by
a public agency or department, including, without limitation, actions
affecting a license as a real estate broker or salesman.
Such statement shall set forth the court, date of conviction or
judgment, any penalty imposed or damages assessed, or the date, nature
and issuer of such order.
(f) The length of time the franchisor: (1) has conducted a business of
the type to be operated by the franchisees, (2) has granted franchises
for such business, and (3) has granted franchises in other lines of
business.
(g) The most recent financial statement of the franchisor, together
with a statement of any material changes in the financial condition of
the franchisor from the date thereof. The department of law may by rule
or order prescribe (1) the form and content of financial statements

required under this article, (2) the circumstances under which
consolidated financial statements shall be required, and (3) the
circumstances under which financial statements shall be audited by
independent certified public accountants.
(h) 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.
(i) A statement describing any payments or fees other than franchise
fees that the franchisee or subfranchisor is required to pay to the
franchisor, including royalties and payments of fees which the
franchisor collects in whole or in part on behalf of a third party or
parties.
(j) A statement of the conditions under which the franchise agreement
may be terminated or renewal refused or repurchased at the option of the
franchisor.
(k) A statement as to whether, by the terms of the franchise agreement
or by other device or practice, the franchisee or subfranchisor 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.
(l) A statement as to whether, by the terms of the franchise agreement
or other device or practice, the franchisee is limited in the goods or
services offered by him to his customers.
(m) A statement of the terms and conditions of any financing
arrangements when offered directly or indirectly by the franchisor or
his agent or affiliate.
(n) 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 or subfranchisor in
whole or in part.
(o) Any representation of estimated or projected franchisee earnings
or income, together with a statement setting forth the data, methods and
computations upon which such estimate or projection is based.
(p) A statement of any compensation or other benefit given or promised
to a public figure arising, in whole or in part, from (1) the use of the
public figure in the name or symbol of the franchise, or (2) the
endorsement or recommendation of the franchise by the public figure in
advertisements.
(q) A statement of the total number and location of franchises
presently operating and proposed to be sold.
(r) A statement as to whether franchisees or subfranchisors receive an
exclusive area or territory.
(s) A representation that the registered prospectus does not knowingly
omit any material fact or contain any untrue statement of a material
fact.
(t) Other information which the franchisor may desire to present.
(u) Other information or such additional disclosures related to the
offer or sale of the franchise as the department of law may prescribe by
rules or regulations promulgated under section six hundred ninety-four
of this article as will afford prospective franchisees an adequate basis
upon which to found their judgment.
(v) When the person filing the application for registration of an
offering prospectus is a subfranchisor, the prospectus shall also
include the same information concerning the subfranchisor as is required
from the franchisor pursuant to this article.

3. Applications for registration of an offering prospectus shall be
signed and verified by the franchisor or by the subfranchisor in the
same manner provided in the civil practice law and rules for the
verification of pleadings.
4. Every application by a franchisor for registration of an offering
prospectus shall be accompanied by a copy of the typical franchise
contract or agreement proposed for use or in use in this state,
including all amendments, deletions, variations, and supplements
thereto.
5. Every application by a franchisor for registration of an offering
prospectus shall be accompanied by such materials, data, records, or
other information as the department may by rule require in connection
with its consideration of the application.
6. The offering prospectus shall recite in bold type of not less than
twelve-point that registration does not constitute approval,
recommendation, or endorsement by the department of law. The department
may require that the applicant set forth in its prospectus potentially
adverse information in designated positions and in a type size
acceptable to the department.
7. Unless otherwise provided by regulation issued by the department,
applications to register the offering prospectus required by subdivision
one of this section shall be filed with the department of law at its
office in the city of New York prior to the offering of the franchise
involved. No offer, advertisement, or sale of such a franchise shall be
made in or from the state of New York until the department has issued to
the franchisor or other offeror a letter stating that the offering
prospectus sought to be registered has been accepted for filing and
filed. The department, not later than thirty days after such filing,
shall issue such a letter or, in the alternative, a notification in
writing indicating the respect in which the application for registration
or the proposed offering prospectus itself is deficient or otherwise
fails to make adequate disclosure. A refusal to register an offering
prospectus, and notification thereof, shall be forthcoming if the
department finds:
(a) That there has been a failure to comply with any of the provisions
of this article or the rules of the department pertaining thereto.
(b) That the offer or sale of the franchise would constitute
misrepresentation to, or deceit or fraud of, prospective franchisees.
(c) That the application for registration of the offering prospectus
or the proposed offering prospectus itself is incomplete in any material
respect or contains any statement which is, in light of the
circumstances under which it was made, false or misleading with respect
to any material fact.
(d) That the franchisor's method of business includes or would include
activities which are illegal where performed.
(e) That a person identified in the application has been convicted of
an offense described in subparagraph one of paragraph (e) of subdivision
two of this section, is subject to an administrative order, or has had a
civil judgment entered against him involving the illegal offering of
franchises or securities, and the department determines that the
involvement of the person in the sale or management of the franchise
creates an unreasonable risk to prospective franchisees.
(f) That the franchise offering sought to be registered is the subject
of a permanent or temporary injunction entered under any federal or
state act applicable to the offering.
(g) That the franchisor has failed to pay the proper fee.
8. A franchise which is subject to registration under this article
shall not be sold without first providing to the prospective franchisee,

a copy of the offering prospectus, together with a copy of all proposed
agreements relating to the sale of the franchise at the earlier of (a)
the first personal meeting between the franchisor or its agent and the
prospective franchisee, (b) at least ten business days prior to the
execution of a binding franchise or other agreement, or (c) at least ten
days prior to the receipt of any consideration in connection with the
sale or proposed sale of a franchise. For the purposes of this chapter,
the words: (i) "first personal meeting" shall mean the first face to
face meeting between a franchisor or franchisor's agent or any
representative or employee thereof and a prospective franchisee which is
held for the purpose of discussing the sale or possible sale of a
franchise; (ii) "other agreement" shall mean an agreement imposing a
binding legal obligation on such prospective franchisee, about which the
franchisor, franchise sales agent, or any agent, representative or
employee thereof, knows or should know, in connection with the sale or
proposed sale of a franchise; and, (iii) "receipt of any consideration"
shall mean the payment by a prospective franchisee, about which the
franchisor, franchise sales agent, or any agent, representative or
employee thereof, knows or should know, of any consideration in
connection with the sale or proposed sale of a franchise.
9. (a) A franchisor shall promptly notify the department in writing,
by an application to amend the registered offering prospectus, of any
material change in the information contained in the prospectus as
originally submitted or amended. The department may further define by
rule what is a material change for the purpose and circumstances under
which an amendment of a registered prospectus shall be mandatory.
(b) An amendment to a registered offering prospectus filed after the
effective date of the registration of the original offering prospectus,
if the amendment is approved by the department, shall become effective
on such date the department may determine, having due regard for the
public interest and the protection of franchisees.
10. (a) Neither the fact that an application for registration of an
offering prospectus under this article has been filed, nor the fact that
such registration has become effective, constitutes a finding by the
department that any document filed under this article, including the
registered offering prospectus, is true, complete or not misleading.
Neither any such fact nor the fact that an exemption is available for a
transaction means that the department has passed in any way upon the
merits or qualifications of, or recommended or given approval to, any
person, franchise, or transaction.
(b) It is unlawful to make or cause to be made to any prospective
purchaser or offeree a representation inconsistent with paragraph (a) of
this subdivision.
11. No offer of a franchise shall be made except by the offering
prospectus registered with the department of law pursuant to this
section. Any advertisement in whatever form, including periodicals or on
radio or television, shall contain a statement that no offer of such
franchise is made except by such offering prospectus, and all such
advertising shall be consistent with the representations and information
required to be set forth in such prospectus as hereinbefore in this
section provided.
12. In all literature employed in the offer and sale of a franchise
and in all advertising in connection therewith, there shall be
contained, in easily readable print on the face thereof, a statement
that the filing of an application for registration of an offering
prospectus or the acceptance and filing thereof by the department of law
as required by this section does not constitute approval of the offering

or the sale of such franchise by the department of law or the attorney
general of this state.
13. A person shall not offer to sell or sell a franchise in this state
on behalf of a franchisor or subfranchisor, except in transactions
exempted under this article, unless the franchisor or subfranchisor and
the person file a franchise agent's application with the department of
law on the form prescribed by the department, and the department issues
an order of registration for such person. The department may prescribe
rules relating to the qualifications, conduct, and denial, suspension,
or revocation or registrations of franchise sales agents.
14. (a) Every franchisor or subfranchisor offering franchises for sale
in this state shall keep and maintain a complete set of books and
records and shall keep and maintain accounts of franchise sales in
accordance with generally accepted accounting principles, and shall make
and file with the department such reports as the department may by rule
prescribe, including an annual report setting forth the franchises sold
by it and the proceeds derived therefrom, and shall furnish to the
department such materials relating to the offer or sale of the franchise
as it may by rule require. All such records are subject at any time to
reasonable periodic, special, or other examinations by a representative
of the department, within or without this state, as the department deems
necessary or appropriate in the public interest or for the protection of
investors.
(b) The department may consider the opinions, appraisals, and reports
of engineers, appraisers, or other experts which may be presented by an
applicant or any interested party, on any question of fact concerning or
affecting the franchises proposed to be offered and sold. In lieu of, or
in addition to, such opinions, appraisals, and reports, the department
may have any or all matters concerning or affecting such franchises
investigated, appraised, passed upon, and certified to it by engineers,
appraisers, or other experts selected by it. The experts' cost of travel
and lodging relating to such investigation, and the costs of experts'
fees, shall be borne by the applicant and shall be paid before
effectiveness of its registration, provided that the applicant shall
have agreed in writing with the department to bear such costs and fees,
or shall have had the opportunity to establish that no good cause exists
for such investigation or expenditure, or shall have himself furnished
the desired information to the department.
(c) If information that the department deems necessary relating to the
franchise is requested by the department and is not furnished by the
applicant, or the department deems information submitted to be
unreliable or substantially incomplete, the department may investigate
any or all matters concerning or affecting such franchise. The costs of
all travel and lodging expenses relating to investigations outside of
this state shall be borne by the applicant and shall be paid before
effectiveness of its registration.
15. The department may by rule require the filing and approval prior
to use of any pamphlet, circular, form letter, advertisement, or other
sales literature or advertising communication addressed to or intended
for distribution to prospective franchisees.