Racketeering: Violation of the Florida franchise and distributorship anti-misrepresentation law constitutes a "racketeering activity" under the Florida RICO Act and a "criminal activity" under the Florida Civil Remedies for Criminal Practices Act.

The RICO Act prohibits the acquisition or maintenance of an enterprise or real property through a pattern of racketeering activity or the collection on an unlawful debt. Among the crimes that constitute a racketeering activity is the commission of any offense relating to fraudulent practices within Chapter 817 of the Florida Statutes. Intentional misrepresentations or nondisclosures in the sale of a franchise or distributorship are included in the prohibition of fraudulent practices, under Section 817.416. The Florida RICO Act makes commission of a pattern of racketeering activity a felony of the first degree punishable by imprisonment not exceeding 30 years and/or a $10,000 fine. The state may bring a civil action for injunctive relief, treble damages, attorneys' fees, and costs. Florida Statutes, 1995, Chapter 895, Section 895.02, as amended by Laws of 1986, Chapter 86-277, approved July 9, 1986, effective October 1, 1986.

The Civil Remedies for Criminal Practices Act prohibits the acquisition or maintenance of an enterprise or real property through a pattern of criminal activity or the collection of an unlawful debt. Among the crimes that constitute a criminal activity is the commission of any offense relating to fraudulent practices within Chapter 817 of the Florida Statutes. Intentional misrepresentations or nondisclosures in the sale of a franchise or distributorship are included in the prohibition of fraudulent practices, under Section 817.416. The Civil Remedies for Criminal Practices Act provides aggrieved parties with a civil action for treble damages, attorneys' fees, and court costs. Florida Statutes, 1995, Chapter 772, Sections 772.101 through 772.19; added by Laws of 1986, Chapter 86-277, approved July 9, 1986, effective October 1, 1986.

Covers Business Opportunities: The Florida Deceptive and Unfair Practices Act expressly covers business opportunities. The definition of "consumer transaction" includes a sale, lease, assignment, or other disposition of goods, a consumer service, or an intangible that "relate[s] to a business opportunity that requires both [an individual's] expenditure of money or property and his personal services on a continuing basis . . ." The statute prohibits unfair methods of competition and unfair or deceptive practices in the conduct of any trade or commerce. Due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and federal courts relating to Section 5 of the FTC Act. A consumer (including a franchisee) may sue for actual damages, injunctive or declaratory relief, attorneys' fees, and costs. Florida Statutes, 1995, Chapter 501, Sections 501.201 through 501.213.

Section 559.80  Sections 559.80-559.815 may be cited as the "Sale of Business Opportunities Act."

Sec. 559.801  For the purpose of ss. 559.80-559.815, the term:

(1) (a) "Business opportunity" means the sale or lease of any products, equipment, supplies, or services which are sold or leased to a purchaser to enable the purchaser to start a business for which the purchaser is required to pay an initial fee or sum of money which exceeds $500 to the seller, and in which the seller represents:

1. That the seller or person or entity affiliated with or referred by the seller will provide locations or assist the purchaser in finding locations for the use or operation of vending machines, racks, display cases, currency or card operated equipment, or other similar devices or currency-operated amusement machines or devices on premises neither owned nor leased by the purchaser or seller;

2. That the seller will purchase any or all products made, produced, fabricated, grown, bred, or modified by the purchase using in whole or in part the supplies, services, or chattels sold to the purchaser;

3. That the seller guarantees in writing that the purchaser will derive income from the business opportunity which exceeds the price paid or rent charged for the business opportunity or that the seller will refund all or part of the price paid or rent charged for the business opportunity, or will repurchase any of the products, equipment, supplies, or chattels supplied by the seller, if the purchaser is unsatisfied with the business opportunity; or

4. That the seller will provide a sales program or marketing program that will enable the purchaser to derive income from the business opportunity, except that this paragraph does not apply to the sale of a sales program or marketing program made in conjunction with the licensing of a registered trademark or service mark that is registered under the laws of any state or of the United States. For the purpose of subparagraph 1., the term "assist the purchaser in finding locations" means, but is not limited to, supplying the purchaser with names of locator companies, contracting with the purchaser to provide assistance or supply names, or collecting a fee on behalf of or for a locator company.

(b) "Business opportunity" does not include:

1. The sale of ongoing businesses when the owner of those businesses sells and intends to sell only those business opportunities so long as those business opportunities to be sold are no more than five in number;

2. The not-for-profit sale of sales demonstration equipment, materials, or samples for a price that does not exceed $500 or any sales training course offered by the seller the cost of which does not exceed $500; or

3. The sale or lease of laundry and dry cleaning equipment.

(2) "Department" means the Department of Agriculture and Consumer Services.

(3) "Purchaser" includes a lessee.

(4) "Seller" includes a lessor.

Sec. 559.802  (1) The sale of a franchise is exempt from this part if:

(a) The franchise meets the definition of that term as defined by the Federal Trade Commission regulations entitled, "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures," as set forth in 16 C.F.R. s. 436.1 et seq.; and

(b) Before offering for sale or selling a franchise to be located in this state or to a resident of this state, the franchisor files a notice with the department stating that the franchisor is in substantial compliance with the requirements of the Federal Trade Commission rule, and pays a fee in an amount set by the department, not exceeding $100.

(2) The initial exemption granted under this section is for a period of 1 year after the date of filing the notice, and it may be renewed each year for an additional 1-year period upon filing a notice for renewal and paying a renewal fee in an amount set by the department, not exceeding $100.

(3) The department may require only the name of the applicant, the name of the franchise and the name under which the applicant intends to, or does, transact business, if different, the applicant's principal business address, and the applicant's federal employer identification number.

(4) The department may adopt rules to implement the provisions of this section.

Sec. 559.803  At least 3 working days prior to the time the purchaser signs a business opportunity contract, or at least 3 working days prior to the receipt of any consideration by the seller, whichever occurs first, the seller must provide the prospective purchaser a written document, the cover sheet of which is entitled in at least 12-point boldfaced capital letters "DISCLOSURES REQUIRED BY FLORIDA LAW." Under this title shall appear the following statement in at least 10-point type: "The State of Florida has not reviewed and does not approve, recommend, endorse, or sponsor any business opportunity. The information contained in this disclosure has not been verified by the state. If you have any questions about this investment, see an attorney before you sign a contract or agreement." Nothing except the title and required statement shall appear on the cover sheet. Immediately following the cover sheet, the seller must provide an index page that briefly lists the contents of the disclosure document as required in this section and any pages on which the prospective purchaser can find each required disclosure. At the top of the index page, the following statement must appear in at least 10-point type: "The State of Florida requires sellers of business opportunities to disclose certain information to prospective purchasers. This index is provided to help you locate this information." If the index contains other information not required by this section, the seller shall place a designation beside each of the disclosures required by this section and provide an explanation of the designation at the end of the statement at the top of the index page. The disclosure document shall contain the following information:

(1) The name of the seller; whether the seller is doing business as an individual, partnership, corporation, or other business entity; the names under which the seller has done business; and the name of any parent or affiliated company that will engage in business transactions with the purchasers or who takes responsibility for statements made by the seller.

(2) The names, addresses, and titles of the seller's officers, directors, trustees, general partners, general managers, and principal executives and of any other persons charged with the responsibility for the seller's business activities relating to the sale of business opportunities.

(3) The length of time the seller has:

(a) Sold business opportunities; or
(b) Sold business opportunities involving the products, equipment, supplies, or services currently being offered to the purchaser.

(4) A full and detailed description of the actual services that the business opportunity seller undertakes to perform for the purchaser.

(5) A copy of a current (not older than 13 months) financial statement of the seller, updated to reflect material changes in the seller's financial condition.

(6) If training is promised by the seller, a complete description of the training, the length of the training, and the cost or incidental expenses of that training, which cost or expense the purchaser will be required to incur.

(7) If the seller promises services to be performed in connection with the placement of the equipment, product, or supplies at a location, the full nature of those services as well as the nature of the agreements to be made with the owners or managers of the location where the purchaser's equipment, product, or supplies will be placed.

(8) If the business opportunity seller is required to secure a bond or establish a trust deposit pursuant to §559.807, either of the following statements:

(a) "As required by Florida law, the seller has secured a bond issued by . . . ., a surety company authorized to do business in this state. Before signing a contract to purchase this business opportunity, you should confirm the bond's status with the surety company."; or

(b) "As required by Florida law, the seller has established a trust account or guaranteed letter of credit . . . (number of account) . . . with . . . (name and address of bank or savings institution). . . . Before signing a contract to purchase this business opportunity, you should confirm with the bank or savings institution the current status of the trust account or guaranteed letter of credit."

(9) The following statement: "If the seller fails to deliver the product, equipment, or supplies necessary to begin substantial operation of the business within 45 days of the delivery date stated in your contract, you may notify the seller in writing and cancel your contract."

(10) If the seller makes any statement concerning sales or earnings or a range of sales or earnings that may be made through this business opportunity, a statement disclosing:

(a) The total number of purchasers of business opportunities involving the product, equipment, supplies, or services being offered who have actually achieved sales of or received earnings in the amount or specified within 3 years prior to the date of the disclosure statement.

(b) The total number of purchasers of business opportunities involving the product, equipment, supplies, or services being offered within 3 years prior to the date of the disclosure statement.

(11) A statement disclosing who, if any, of the persons listed in subsections (1) and (2):

(a) Has, at any time during the previous 10 fiscal years, regardless of adjudication, been convicted of, or found guilty of, or pled guilty or nolo contendere to, or has been incarcerated within the last 10 years as a result of having previously been convicted of, or found guilty of, or pled guilty or nolo contendere to, a felony or a crime involving fraud, theft, larceny, violation of any franchise or business opportunity law or unfair or deceptive practices law, embezzlement, fraudulent conversion, misappropriation of property, or restraint of trade.

(b) Has, at any time during the previous 7 fiscal years, been held liable in a civil action resulting in a final judgment or has settled out of court any civil action or is a party to any civil action involving allegations of fraud (including violation of any franchise or business opportunity law or unfair or deceptive practices law), embezzlement, fraudulent conversion, misappropriation of property, or restraint of trade or any civil action which was brought by a present or former franchisee or franchisees and which involves or involved the franchise relationship. However, only material individual civil actions need be so listed pursuant to this paragraph, including any group of civil actions which, irrespective of the materiality of any single such action, in the aggregate is material.

(c) Is subject to any currently effective state or federal agency or court injunctive or restrictive order, or has been subject to any administrative action in which an order by a governmental agency was rendered, or is a party to a proceeding currently pending in which such order is sought, relating to or affecting business opportunities activities or the business opportunity seller-purchaser relationship or involving fraud (including violation of any franchise or business opportunity law or unfair or deceptive practices law), embezzlement, fraudulent conversion, misappropriation of property, or restraint of trade. Such statement shall set forth the identity and location of the court or agency; the date of conviction, judgment, or decision; the penalty imposed; the damages assessed; the terms of settlement or the terms of the order; and the date, nature, and issuer of each such order or ruling. A business opportunity seller may include a summary opinion of counsel as to any pending litigation, but only if counsel's consent to the use of such opinion is included in the disclosure statement.

(12) A statement disclosing who, if any, of the persons listed in subsection (1) and (2) at any time during the previous 7 fiscal years has:

(a) Filed in bankruptcy.
(b) Been adjudged bankrupt.
(c) Been reorganized due to insolvency.
(d) Been a principal, director, executive officer, or partner of any other person that has so filed or was so adjudged or reorganized during or within 1 year after the period that such person held such position in relation to such other person. If so, the name and location of the person having so filed or having been so adjudged or reorganized, the date thereof, and any other material facts relating thereto shall be set forth.

(13) A copy of the business opportunity contract which the seller uses as a matter of course and which is to be presented to the purchaser at closing.

Should any seller of business opportunities prepare a disclosure statement pursuant to 16 C.F.R. §§436.1 et seq., a Trade Regulation Rule of the Federal Trade Commission regarding Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures, the seller may file that disclosure statement in lieu of the document required pursuant to this section. Should the seller be required pursuant to 16 C.F.R. to prepare any other documents to be presented to the prospective purchaser, those documents shall also be filed with the department.

Sec. 559.805  (1) Every seller of a business opportunity shall annually file with the department a copy of the disclosure statement required by s. 559.803 prior to placing an advertisement or making any other representation designed to offer to, sell to, or solicit an offer to buy a business opportunity from a prospective purchaser in this state and shall update this filing by reporting any material change in the required information within 30 days after the material change occurs. An advertisement is not placed in the state merely because the publisher circulates, or there is circulated on his or her behalf in the state, any bona fide newspaper or other publication of general, regular, and paid circulation which had more than two-thirds of its circulation during the past 12 months outside the state or because a radio or television program originating outside the state is received in the state. If the seller is required by s. 559.807 to provide a bond or establish a trust account or guaranteed letter of credit, he or she shall contemporaneously file with the department a copy of the bond, a copy of the formal notification by the depository that the trust account is established, or a copy of the guaranteed letter of credit. Every seller of a business opportunity shall file with the department a list of independent agents who will engage in the offer or sale of business opportunities on behalf of the seller in this state. This list must be kept current and shall include the following information: name, home and business address, telephone number, present employer, social security number, and birth date. No person shall be allowed to offer or sell business opportunities unless the required information has been provided to the department.

(2) Every seller of a business opportunity shall file with the department a list of the seller's officers, directors, trustees, general partners, general managers, principal executives, and any other persons charged with the responsibility for the seller's business activities relating to the sale of business opportunities. This list must be kept current and shall include the following information: name, home and business address, telephone number, driver's license number, the state in which the driver's license is issued, and birth date.

(3) Upon the filing of the disclosure statement and the posting of a bond or the establishment of a trust account or a guaranteed letter of credit, if any is required, the department shall issue to the business opportunity seller an advertisement identification number. The business opportunity seller shall include and prominently display the advertisement identification number in all written advertisements, sales materials, promotional documents, and business opportunity contracts.

(4) The seller shall disclose, to each person with whom he or she places advertising, the advertisement identification number, which shall be recorded by the person receiving the advertising so that the advertising media may verify the authenticity of the registration.

(5) The department shall collect, from a seller required to comply with this section, an annual fee of $300 for the administration and enforcement of ss. 559.801-559.815. If any material change in the information submitted to the department occurs before the date for annual registration, a seller must submit a fee of $50 for every update filing required by this section. The fees shall be deposited in the General Inspection Trust Fund of the Department of Agriculture and Consumer Services.

Sec. 559.807  If the business opportunity seller makes any representations set forth in s. 559.801(1)(a)3., the seller must either have obtained a surety bond issued by a surety company authorized to do business in this state or have established a trust account or a guaranteed letter of credit with a licensed and insured bank or savings institution located in the state. The amount of the bond, trust account, or guaranteed letter of credit shall be an amount not less than $50,000. The bond or trust account shall be in the favor of the department. Any person who is damaged by any violation of ss. 559.80-559.815, or by the seller's breach of the contract for the business opportunity sale or of any obligation arising therefrom, may bring an action against the bond, trust account, or guaranteed letter of credit to recover damages suffered; however, the aggregate liability of the surety or trustee shall be only for actual damages and in no event shall exceed the amount of the bond, trust account, or guaranteed letter of credit.

Sec. 559.809  Business opportunity sellers shall not:

(1) Misrepresent, by failure to disclose or otherwise, the known required total investment for such business opportunity.

(2) Misrepresent or fail to disclose efforts to sell or establish more franchises or distributorships than it is reasonable to expect the market or market area for the particular business opportunity to sustain.

(3) Misrepresent the quantity or the quality of the products to be sold or distributed through the business opportunity.

(4) Misrepresent the training and management assistance available to the business opportunity purchaser.

(5) Misrepresent the amount of profits, net or gross, which the franchisee can expect from the operation of the business opportunity.

(6) Misrepresent, by failure to disclose or otherwise, the termination, transfer, or renewal provision of a business opportunity agreement.

(7) Falsely claim or imply that a primary marketer or trademark of products or services sponsors or participates directly or indirectly in the business opportunity.

(8) Assign a so-called "exclusive territory" encompassing the same area to more than one business opportunity purchaser.

(9) Provide vending locations for which written authorizations have not been granted by the property owners or lessees.

(10) Provide machines or displays of a brand or kind substantially different from and inferior to those promised by the business opportunity seller.

(11) Fail to provide the purchaser a written contract as provided in s. 559.811.

(12) Misrepresent their ability or the ability of a person or entity providing services as defined in s. 559.801(1)(a) to provide locations or assist the purchaser in finding locations expected to have a positive impact on the success of the business opportunity.

(13) Misrepresent a material fact or create a false or misleading impression in the sale of a business opportunity.

Sec. 559.811  (1) Every business opportunity contract shall be in writing, and a copy shall be given to the purchaser at least 3 working days before signing the contract.

(2) Every contract for a business opportunity shall include the following:

(a) The terms and conditions of payment, including the total financial obligation of the purchaser to the seller.
(b) A full and detailed description of the acts or services that the business opportunity seller undertakes to perform for the purchaser.
(c) The seller's principal business address and the name and address of its agent in the state authorized to receive service of process.
(d) The approximate delivery date of products, equipment, or supplies which the business opportunity seller is to deliver to the purchaser.

Sec. 559.813 (1) If a business opportunity seller uses untrue or misleading statements in the sale of a business opportunity, fails to give the proper disclosures in the manner required by this part, or fails to deliver the equipment, supplies, or products necessary to begin substantial operation of the business within 45 days of the delivery date stated in the business opportunity contract, or if the contract does not comply with the requirements of this part, the purchaser may, within 1 year of the date of execution of the contract and upon written notice to the seller, rescind the contract and shall be entitled to receive from the business opportunity seller all sums paid to the business opportunity seller. Upon receipt of such sums, the purchaser shall make available to the seller at the purchaser's address, or at the places at which they are located at the time notice is given, all products, equipment, or supplies received by the purchaser. The purchaser shall not be entitled to unjust enrichment by exercising the remedies provided in this subsection.

(2) (a) The department may enter an order imposing one or more of the penalties set forth in paragraph (b) if the department finds that a seller or any of the seller's principal officers or agents:

1. Violated or is operating in violation of any of the provisions of this part or of the rules adopted or orders issued thereunder;
2. Made a material false statement in any application document, or record required to be submitted or retained under this part;
3. Refused or failed, after notice, to produce any document or record or disclose any information required to be produced or disclosed under this part or the rules of the department;
4. Made a material false statement in response to any request or investigation by the department, the Department of Legal Affairs, or state attorney; or
5. Has intentionally defrauded the public through dishonest or deceptive means.

(b) Upon a finding as set forth in paragraph (a), the department may enter an order doing one or more of the following:

1. Issuing a notice of noncompliance pursuant to section 120.695.
2. Imposing an administrative fine not to exceed $5,000 per violation for each act which constitutes a violation of this part or a rule or order.
3. Directing that the seller or its principal officers or agents cease and desist specified activities.
4. Refusing to issue or revoking or suspending an advertisement identification number.
5. Placing the registrant on probation for a period of time, subject to such conditions as the department may specify.

(c) The administrative proceedings which could result in the entry of an order imposing any of the penalties specified in paragraph (b) shall be conducted in accordance with chapter 120.

(3) Any purchaser injured by a violation of this part, or by the business opportunity seller's breach of a contract subject to this part or any obligation arising therefrom, may bring an action for recovery of damages, including reasonable attorney's fees.

(4) Upon complaint of any person that a business opportunity seller has violated the provisions of this part, the circuit court shall have jurisdiction to enjoin the defendant from further such violations.

(5) The Department of Legal Affairs, the Department of Agriculture and Consumer Services, or the state attorney, if a violation of this part occurs in her or his judicial circuit, are the enforcing authorities for purposes of this part, and they may bring civil actions in circuit court for temporary or permanent injunctive relief and may seek other appropriate civil relief, including, but not limited to, a civil penalty not to exceed $5,000 for each violation, restitution and damages for injured purchasers of business opportunities, and court costs and reasonable attorney's fees.

(6) Any remedy provided in this section may be recovered in an appropriate action, or the enforcing authority may terminate any investigation or action upon agreement by the offender to pay as stipulated civil penalty, to make restitution or pay damages to purchasers, or to satisfy any other relief authorized in this section and requested by the enforcing authority.

(7) The remedies provided herein shall be in addition to any other remedies provided by law or in equity.

(8) The department has the authority to adopt rules pursuant to chapter 120 to implement this part.

Sec. 559.815  Any person who fails to file with the department as required by s. 559.805 or who commits an act described in s. 559.809 is guilty of a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.