PENN STATE LAW REVIEW Published as the Dickinson Law Review since 1897 THE DICKINSON SCHOOL OF LAW THE PENNSYLVANIA STATE UNIVERSITY BEGUILING Heresy: REGULATING THE FRANCHISE RELATIONSHIP Paul Steinberg Gerald Lescatre PENNSTATE The Dickinson School of Law Volume 109 2004 Number 1BEGUILING HERESY: REGULATING THE FRANCHISE RELATIONSHIP Errata Page 129, par. 2, line 2, should read: The constraining influence of non-judicial (eg., reputational) norms on behavior are proportional to the degree of kinship. Page 188, formula should read: MRP > MFC Page 206, footnote 563, should read. Supra note 343.Beguiling Heresy: Regulating the Franchise Relationship Paul Steinberg* & Gerald Lescatre** Introduction....... Pre-Sale Issues... . Fictive Kinship: The Franchise “Family” .. Partnership... se Franchise Success/Failure Rates Earnings Claims Targeting Prospective Franchisees. Labor Issues. . Post-Sale Relationship Issues Soureing Requirements: Fiduciary & Antitrust Issues... Encroachment ...... Franchise Inspections & Audits . . Post-Relationship Issues Selling the Franchise Franchise “Renewal” Goodwill . Good Faith and Goodwill: Hartford Blectric v. Allen-Bradley. Issues During and After the Relationship Good Faith and Relational Contracts: Fruits of the Contract. PSUOD>SSOPPE™ MOORE * BS., Univ. of Maryland, J.D., St. John’s Univ. School of Law. From 1996- 2003, a franchisee of Doctor’s Associates Inc., the franchisor of Subway™ Sandwiches & Salads. The author may be reached at pwsteinberg@msn.com. The authors acknowledge: Prof. Robert Zinman for his invaluable advice, Brian Peterson, Esq. and Subway Development Agent Paul Landino for their comments and spirited discourse, and Paul Jones, Esq. for his helpful insights regarding global franchising regulation. ** Gerald Leonard Lescatre (1958-2003) passed away before this article was completed. A 1984 graduate of the New York Institute of Finance (A.S. Finance), Gerry was a Registered Securities Principal and Registered Options Principal. He specialized in the food service industry and participated in the Initial Public Offerings of franchisors Manhattan Bagel and New World Coffee. At the time of his passing, Gemy was a kind and generous operator of a Subway™ in New York City for seven years, Gerry’s concern for his employees is fondly remembered, as is his belief that fair franchising provides opportunities for all. He would acknowledge his parents Robert and Clarisse Lescatre of Manchester, N.H. 105