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Business Franchise Law

Business Franchise Law

Many of us may refer to a store with multiple locations as part of a “chain” or franchise without really understanding the structure of these kinds of businesses. What is a business franchise? How are they formed, and how do they operate? The following article considers some of the aspects of franchises that make them distinct from other kinds of businesses.

Who Owns the Franchise?

A business may have multiple locations without being a franchise. If the locations all have the same owner, then the business does not meet the definition of a franchise. A business franchise is defined by the structure of its ownership.

Franchising occurs when the owner of a business grants a license to one or more parties for the purpose of conducting business using the same trademarks, trade names, trade dress, and other identifying aspects of the business. The party granting the license is referred to as the “franchisor,” while those purchasing licenses are referred to as the “franchisee.”

The franchisor is frequently involved in specifying the products and services offered by the franchisees. They may also provide a system of operation, marketing tools, raw materials, training, and other forms of support.

Different Types of Franchises

There are two basic kinds of franchise relationships:

  • Product or Trade Name Franchising refers to franchises where the owner holds the right to a name or trademark, which is then sold or licensed to franchisees; or
  • Business Format Franchising refers to franchises where the franchisor and franchisee have an ongoing relationship in which the franchisor provides services such as site selection, training, marketing plans, and other tools for your business.

Individual states may have different business franchise definitions. Some states require a marketing plan or “community of interest” provision in their definition. The Federal Trade Commission (FTC) has its own business franchise definition that will generally apply when:

  • The franchisor licenses the right to use its trade or service marks to the franchisee;
  • These marks are used to identify the franchisee’s business in marketing a product or service using the franchisor’s operating method;
  • The franchisor provides the franchisee with support and maintains some degree over control over the franchisee’s activities; and
  • The franchisee pays the franchisor a fee.

Certainly, every franchise involves a license, though not all licenses are franchises. Whether a business meets the federal or local business franchise definition may affect the kinds of disclosures that are required. However, these definitions do not greatly impact your rights when a disagreement arises since, in either case, a contract is involved.

Contracts for a Franchise

Franchises are built out of contracts between the franchisor and franchisees. As such, there are two places a franchisee can look to determine their rights and responsibilities within the relationship: the language of the contract itself and the relevant jurisdiction’s contracts laws.

The franchise agreement creates many of the most important rights and obligations between the franchisor and franchisee, including the degree of control the franchisor may exercise over the franchisee, terms of operation, training requirements, trademark and copyright obligations, renewal and termination options, and other important details. The jurisdiction’s laws indicate how contracts are interpreted and enforced when the parties have a disagreement.

Free Consultation with a Franchise Lawyer

If you are here, you probably have a franchise issue you need help with, call Ascent Law for your free franchise law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

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About the Author

People who want a lot of Bull go to a Butcher. People who want results navigating a complex legal field go to a Lawyer that they can trust. That’s where I come in. I am Michael Anderson, an Attorney in the Salt Lake area focusing on the needs of the Average Joe wanting a better life for him and his family. I’m the Lawyer you can trust. I grew up in Utah and love it here. I am a Father to three, a Husband to one, and an Entrepreneur. I understand the feelings of joy each of those roles bring, and I understand the feeling of disappointment, fear, and regret when things go wrong. I attended the University of Utah where I received a B.A. degree in 2010 and a J.D. in 2014. I have focused my practice in Wills, Trusts, Real Estate, and Business Law. I love the thrill of helping clients secure their future, leaving a real legacy to their children. Unfortunately when problems arise with families. I also practice Family Law, with a focus on keeping relationships between the soon to be Ex’s civil for the benefit of their children and allowing both to walk away quickly with their heads held high. Before you worry too much about losing everything that you have worked for, before you permit yourself to be bullied by your soon to be ex, before you shed one more tear in silence, call me. I’m the Lawyer you can trust.