The Florida Franchise Act: protection for the in-state franchisor or out-of-state franchisee?

• Author: Waldman, Glenn J.

The Florida Franchise Act ("the act"), F.S. [sections] 817.416, provides a private right of act to a civil litigant(1) when a person, as defined by the act, in selling or establishing a franchise or distributorship misrepresents:

(1) the prospects or chances of success of a proposed or existing franchise or distributorship;

(2) the known required total investment for such franchise or distributorship; or

(3) efforts to sell or establish more franchises or distributorships than is reasonable to expect the market or market area for the particular franchise or distributorship to sustain.

F.S. [sections] 817.416(2)(a)(1-3).

The remedy for such misrepresentations includes the return of all moneys invested in the franchise or distributorship and reasonable attorneys' fees.

The act defines the term person as "an individual, partnership, corporation, association, or other entity doing business in Florida" (Emphasis supplied). F.S. [sections] 817.416(1)(a). Inasmuch as the private right of action afforded under subsection (3) of the act is expressly limited to "any person," the aggrieved purchaser must be "doing business in Florida."

No appellate court has squarely discussed the issue of whether the act applies to govern a dispute between an in-state franchisor and an out-of-state franchisee. However, four federal district courts in Florida have dealt with this issue, albeit with inconsistent results.

The first such case, Burger King Corporation v. Austin, 805 F. Supp. 1007 (S.D. Fla. 1992), involved, in part, the motion of Burger King to dismiss the amended counterclaim of the Austins, who were non-Florida franchisees of two Burger King restaurants. Among their various claims, the Austins alleged that Burger King had violated the act by intentionally misrepresenting material facts that were intended to induce them to enter into a franchise agreement. Id. at 1022. Burger King, however, countered that the Austins did not have standing under the act because it applied only to "persons" that were "doing business in Florida." Id. Judge Hoeveler wrote that he "was unable to find any case interpreting the Florida Statute as [Burger King] has suggested." Id. Nonetheless, Judge Hoeveler initially accepted the position posited by Burger King and noted, id., that:

The Florida Franchise Act does not reveal a similar, clear intention by the Florida legislature to limit its application to Florida residents or domiciliaries. The Act defines "person" as "an individual, partnership, corporation, association, or other entity doing business in Florida."

Substituting the definition of "person" into the other relevant portions of the Florida Franchise Act, demonstrates that the Act is...