Franchise Act Interpretive Statement FIS-05

RE: RCW 19.100.030(4) (B) (ii) and (iii), TRADE SHOWS AND ADVERTISING

Question Presented:

Does participation in an advertised trade show in the state of Washington disqualify a franchisor from the use of the exemption RCW 19.100.030(4) (ii) or (iii)?

Discussion:

Franchise trade shows are open to the general public and typically solicit prospective attendees through mass mailings, newspaper, professional publications, radio broadcasts and other advertising media. Franchise trade shows afford franchisors a convenient opportunity to offer their franchises to the general public. Advertising may, but often does not, include the names of the franchisors or the types of franchises participating in the trade show.

The Franchise Investment Protection Act, Ch. 19.100 RCW, requires all offers and sales of franchises in the state of Washington to be registered unless a specific exemption from registration is available to the franchisor. RCW 19.100.020. One of the most used exemptions is RCW 19.100.030(4) (a), (b) (ii) and (c), which permits the franchiser to sell up to nine franchises in the state of Washington. Subparagraph (B) of RCW 19.100.030 (4) (b) (ii) specifically prohibits a franchisor from advertising:

". . .using radio, television, newspaper, magazine, billboard, or other advertising medium the principal office of which is located in the state of Washington or Oregon, concerning the sale of or offer to sell franchises:. . ."

Similar language is included in the exemption of RCW 19.100.030(4) (b) (iii) (B). The legislature clearly intended to prohibit franchisors using this exemption from soliciting prospective purchasers through the means of advertising set forth. A franchisor may not evade this prohibition by relying on a trade show to advertise for the franchisor.

Furthermore, subparagraph (B) prohibits a franchisor from advertising, using radio, television, newspaper, magazine, billboard or other advertising medium. "Medium" is broadly defined by Webster’s Third New International Dictionary 1403 (1961) as a means or instrumentality by which something is communicated or carried on.

Under this broad construction, a franchise trade show itself qualifies as a means or instrumentality that allows the franchisor to advertise and offer franchises to the public. Thus, a trade show may constitute an advertising medium within the language of subparagraph (B) or RCW 19.100.030(4) (b) (ii) and (4) (b) (iii).

Conclusion:

Based upon the foregoing, participation by a franchisor in a trade show in the state of Washington removes the availability of the exemption of RCW 19.100.030(4) (a), (b) (ii) and (c) or the exemption of RCW 19.100.030(4) (a), (b), (iii) and (c).

Adopted January 1, 1991
Replaces Statement of Policy 87-68
JACK L. BEYERS, Securities Administrator
Prepared by Martin Cordell, Securities Examiner