Item 18: Public Figures
Item 18 of the amended Rule requires the disclosure of certain information about a public figure’s involvement in the franchise system. This covers public figures who lend their name or image to the franchise, control or manage the franchisor, or invest in the franchisor.
Who Qualifies as a “Public Figure”?
A public figure means a person whose name or physical appearance is generally known to the public in the geographic area where the franchise will be located. Typical public figures include sports stars, actors, musicians, and similar celebrities.
Use of Name, Image, or Endorsement
If a public figure’s name is used as part of the franchisor’s name, the public figure’s image is used as a symbol associated with the franchise, or the public figure endorses or recommends the franchise to prospective franchisees, then the franchisor must disclose any compensation or other benefits given or promised to the public figure. Item 18 is limited to circumstances when a public figure’s identification with a system is for the purpose of selling franchises. Merely using a public figure as a spokesperson to promote a system’s products or services sold to consumers does not bring a franchisor within the ambit of the amended Rule’s Item 18 requirements.
Management
If a public figure is involved in the management or control of the franchisor, the franchisor must disclose the extent of that involvement, including the public figure’s position in the franchisor and his or her duties in the business structure.
Investment
If a public figure invests in the franchisor, the franchisor must disclose the type and total amount of his or her investment. The “type” of investment includes cash, stock, promissory notes, and any in-kind services performed or to be performed by the public figure.
This article is part of a series of articles on starting a franchise in Minnesota.
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