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Court Watch

By Christopher M. Hanes
April 27, 2007

When a Business Agreement Is Not a Franchise Relationship

When are franchisors not required to provide prospective franchisees disclosures under franchise laws and regulations? The easy answer: when the 'franchisor' isn't really a franchisor. A Pennsylvania trial court granted a motion for summary judgment filed by the developer of a new concept who failed to comply with the franchise disclosure regulations because the relationship between the concept developer and a health care provider was not a 'franchise' under the FTC Franchise Rule. Mercy Health Sys. v. Metropolitan Partners Realty LLC, Business Franchise Guide '13,522 (filed Jan. 19, 2007).

Mercy Health System entered into two 15-year agreements with Metro-politan Partners Realty to operate two new ambulatory care facilities in Pennsylvania. After Mercy's efforts failed to renegotiate the agreements to address certain perceived inequities, Mercy filed a lawsuit alleging causes of action for rescission of the lease agreements, among other things, based on Metropolitan's failure to provide certain required disclosures prescribed by the federal franchise regulations.

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