IFA URGES NEW YORK TO DELAY IMPLEMENTATION OF NEW FRANCHISE RULES

For immediate release
Contact: Alisa Harrison, 202-628-8000
aharrison@franchise.org
www.twitter.com/IFADC

WASHINGTON, July 21, 2009—The International Franchise Association is urging the state of New York to delay implementation of its recently released franchisor information reporting rule so the franchise community has more time to properly comply with the new rules

In a letter to Acting Commissioner of the New York State Department of Taxation and Finance Jamie Woodward, IFA President & CEO Matthew Shay said the new law, which for the first time requires franchisors to submit annual transaction information pertaining to their franchisees electronically to the New York State Department of Taxation and Finance, poses several challenges for franchise systems as well as privacy and legal concerns.

“We are working with franchisors to help them comply with this law,” Shay said. “Since this requirement is the first of its kind in the nation, there is significant uncertainty among franchisors about how to comply with this new obligation. Therefore, the IFA requests the initial deadline of Sept. 20, 2009, for the reporting period March 1 through Aug. 31, 2009, be delayed until Dec. 31, 2009.”

Shay said that the requirement of detailed information, such as gross sales, sales to franchisees by suppliers recommended by the franchisor and federal tax identification numbers of the franchise, logistically would be difficult to obtain within 20 days as stated in the original rule, if at all. For example:

• The value of goods and services sold may vary due to the different tax treatments of goods and services. For example, a gross sales figure reported to a franchisor might be different than the figure reported for sales tax purposes if certain goods and service are not taxable in New York.

• Some franchise systems may measure franchisee performance by factors other than gross revenue, such as room-nights sold for the lodging industry or cents-per-gallon of products sold in certain restaurant systems.

• Data regarding sales by suppliers may be difficult or impossible to gather by the franchisor. While some franchisors do negotiate with suppliers on behalf of franchisees, this is not a universal practice, and franchisors may not keep track of this information on a store-by-store basis. Additionally, the gathering of supplier sales data by a franchisor may be viewed as an infringement on a franchisee’s relationship with the supplier.

“We urge New York to carefully consider the broad ramifications of this unprecedented law,” Shay said. “We urge you to grant our request for a delay of time for franchise systems to fully comply.”

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About the International Franchise Association
The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of nearly 1,300 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site at www.franchise.org