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The Risks of Failing to Consider Disclosure Obligations in Confidential Settlements

Franchisors who enter into settlement agreements requiring that they keep their terms confidential put themselves in jeopardy if they fail to first consider their disclosure obligations. It is well settled that franchisors may not attempt to contract around “Item 3” of the Franchise Disclosure Document (FDD), which requires they disclose whether they were “a party to any material civil action involving the franchise relationship in the last fiscal year.” This disclosure includes “all material settlement terms . . . whether or not the agreement is confidential.” A recent Seventh Circuit decision highlights the issues that can arise when franchisors fail to carve out their disclosure obligations in confidential settlement agreements.

Franchisees are Not off the Hook Just Because They Invoke Cancellation Language in the Franchise Agreement

Language contained in a franchise disclosure document (FDD) permitting cancellation of the franchise agreement after execution but before the franchise is opened does not rescind the agreement or relieve a franchisee from complying with the non-disclosure and non-competition obligations contained in the franchise agreement. A federal district court in Florida made exceedingly clear in an October 2016 decision that even if a franchise agreement is cancelled and rescinded, its non-disclosure and non-competition obligations can still tie the franchisee’s hands. In other words, franchisors may enforce these obligations even when the franchisee never opens the franchise.

News & Press

Larkin Hoffman’s franchise and distribution practice launched its Franchisor Attorneys blog earlier this month. The blog will provide information to those who are considering franchising their business and to business owners who operate emerging and mature franchise systems. We are interested to hear what our readers think, so please check out the blog and send us your comments.
Chuck ModellJoe FittanteAndrew Perrin and Jim Susag have been listed in the International Who’s Who Legal: Franchise 2016, published by Who’s Who Legal. The list is made up of franchise attorneys identified through comprehensive and independent surveys of peers in both general counsel and private practice positions worldwide. By receiving this honor, these four Larkin Hoffman attorneys are recognized among fewer than 200 leading franchise lawyers in the United States.

Chuck Modell will be presenting “Presenting Financial Performance Representations to Prospective Franchisees – Maximizing the Effectiveness of Your Presentation and Complying with New Rules” at the upcoming IFA 2017 conference in Las Vegas, Nevada, starting on January 29Inga Schuchard will be leading a Business Solution Roundtable discussion on effective noncompete agreements at the IFA 2017 conference in Las Vegas, Nevada, on January 31. Other members of the franchise and distribution practice, including Andrew PerrinJim SusagSusan Tegt, and Sawan Patel, will also attend the conference.

In the Community

Larkin Hoffman “Rocked the Red Kettle” with the Salvation Army onSaturday, Nov. 19 by staffing the Red Kettles at Mall of America. Larkin Hoffman provided 77 hours of Red Kettle staffing, with more than 40 employee volunteers and their families, at 11 kettles, for seven hours at each kettle. The Red Kettles at the MOA raised nearly $5,400 that day.

Larkin Hoffman hosted its annual bake sale for the Bloomington Holiday Joy Campaign, VEAP, and Bridging, on Tuesday, Dec. 6. The campaign benefits an adult group home in Bloomington for physically and mentally challenged adults. VEAP (Volunteers Enlisted to Assist People) is an organization that strives to provide financial, emotional, and physical support to low-income individuals and families living in the community. Bridging provides furniture and household goods to those transitioning out of homelessness and poverty. The firm raised approximately $1,500 that was distributed between these organizations. Larkin Hoffman has conducted the charitable bake sale for more than 10 years and raised more than $10,000. Five Larkin Hoffman employees were recognized at the City of Bloomington “Volunteers Who Have Made a Difference” event for their contributions.

On Martin Luther King Jr. Day, 25 Larkin Hoffman attorneys, staff, and family members packed and sorted food at Second Harvest Heartland. They packed 3,840 pounds of food, which will help feed hungry families in the upper Midwest.

Winter 2017 Issue

Our Professionals


Charles Modell, CFE



Joseph Fittante, Jr.



Mark Robertson



James Susag



Andrew Perrin, CFE



William Thornton




Susan Tegt




Sawan Patel



Inga Schuchard



Bryan Huntington, editor



Henry Pfutzenreuter, editor




Jill Henson



Jan Jahn



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Larkin Hoffman provides counsel to a wide variety of ‎organizations, from ‎small businesses and nonprofits to  Fortune 500 companies, in ‎many areas of practice including ‎corporate and governance matters, litigation, real ‎estate, government relations, labor and employment, intellectual property, ‎information technology, ‎franchising and taxation. The firm also serves the needs of individuals in many ‎areas ‎including trusts and estates, personal injury and family law.


This newsletter is provided as a service to our clients and firm associates. While the information provided in this newsletter is believed to be accurate, it is general in nature and should not be construed as legal advice.