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18 Franchise L.J. 1 (1998-1999)

handle is hein.journals/fchlj18 and id is 1 raw text is: FRNCHISE LAW JOURNAL AMERICAN BAR ASSOCIATION QUARTERLY JOURNAL OF THE FORUM ON FRANCHISING VOLUME 18, NUMBER I • SUMMER 1998 Y2K Implications for Franchising By THOMAS M. PITEGOFF ost public companies, including public franchise companies, have been making Year 2000 (Y2K) disclo- sures in their annual and quarterly securities filings at least since the first quarter of 1998. The high degree of Y2K disclosure by public companies for securities law pur- poses is in stark contrast to Y2K disclosure in franchise offering cir- culars, a topic that franchisors are Thomas M. Pitegoff only now beginning to consider. Should franchisors make Y2K disclosures to prospective franchisees as part of their franchise offering circulars? Like securities prospectuses, franchise offering circulars are intended to provide information to investors for their protec- tion. Purchasers of franchises, like purchasers of securities, are entitled to receive information that may have a material effect on their investments and might affect their decision to invest. Although there are significant differences between securities and franchise laws, there is good reason for fran- chisors to consider making some form of Y2K disclosure to prospective franchisees. Aside from the disclosure question, some franchisors may have contractual responsibilities that would imply an obliga- tion to assist their franchisees with their Y2K compliance. Finally, both franchisors and franchisees should be assessing the impact of the Y2K problem on their operations for the sake of their own business survival. What is the Y2K Problem? As every business executive and attorney knows by now, the Y2K problem results from the fact that many software pro- grams and computing devices store year values in two Mr. Pitegoff, a partner at the law firm of Halket & Pitegoff LLP in White Plains, New York, is on the Y2K and franchise panels of the CPR Institute for Dispute Resolution. He can be reached at pitegoff@hal- pit. com. digits.' These programs and devices recognize the value 98 as 1998, but incorrectly read the value 00 as 1900 instead of 2000. This misreading of the year can result in a system failure or miscalculations causing business disrup- tions. The software or device may be unable to process trans- actions, send invoices, or engage in similar normal business activities. Some software that recognizes the year 2000 may not recognize it as a leap year. The problem can arise early, as some data base programs recognize 9/9/99 as a place holder rather than a date, or when businesses find that their insurance companies have excluded Y2K risks. Any compa- ny's assessment of the problem cannot be confined to its internal operations. Suppliers may be unable to fill orders. Banks may be unable to extend credit. Franchisees may be unable to supply accurate reports or to make required pay- ments to franchisors. (continued on page 23) In This Issue Y2K Implications for Franchising .................... 1 The Misuse of Integration, No Representation, and No Reliance Clauses in the Name of Contract Certainty ................ .......... 3 Selecting the Proper Forum to Enforce One's Choice of Forum ................................. 7 Franchisor Liability for the Criminal Acts of Others. 11 SEE Chair's Column ............................2 Editor-in-Chief s Column ........................... 2 Franchising Bookshelf ............................ 19 Franchising Currents .................. ............ 31 (Including cases on: implied duty of good faith and fair dealing; arbitration; jurisdiction and venue; Petroleum Marketing Practices Act; enforcement of contractual provisions; and others) IA L

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