II. MISREPRESENTATIONS AND OMISSIONS

Franchisors must ensure that their offering circulars, promotional material and sales presentations are complete, accurate and truthful. Material misrepresentations and omissions can provide a basis for common law fraud claims against both the franchisor and the individuals who made the misleading statements.

Moreover, material misrepresentations and omissions violate state unfair trade practices and "Little FTC" acts and may form the basis for a claim for rescission of the franchise agreement, the award of triple damages and an assessment of administrative fines and attorneys' fees. Significantly, principals of the franchisor can be held personally liable for the material misrepresentations and omissions of others.

Franchisors must institute compliance programs and training programs to avoid making any untrue statement of a material fact, omitting any material fact whose absence renders another statement misleading, any fraudulent or deceitful act or practice, any violation of any franchise law or rule, or any attempt to compel a waiver of any state provision.

Aside from criminal and civil liability, state franchise administrators have broad remedial powers over and above their power to deny registration, including their authority to issue cease and desist orders, stop orders, order injunctive relief, as well as other administrative means to suspend sales in the state. Moreover, state administrators can issue a stop order, prohibiting the further sale of franchises within the state, without prior notice or an opportunity to be heard.