The legal definition of franchising

The legal definition of a franchise differs among the several states that have passed franchise registration statutes and the Federal Trade Commission (FTC). California was the first state to pass a franchising law, and its definition is similar to the definition of franchise used by the other states that have franchise registration statutes. The California definition, taken from California Business and Professions Code, Section 2001, defines "franchise" as follows:

Franchise means a contract or agreement, express or implied, whether oral or written, between two or more persons by which:

• A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor.
• The operation of the franchisee's business pursuant to that plan or system as substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliates; and
• The franchisee is required to pay, directly or indirectly, a franchise fee.

The cited business definition mentioned previously meets the elements of the legal definition; however, the attitudes of the franchisor and franchisee in looking upon the franchise as the "marketing arm" or the "independent company owned office substitute" of the franchisor set the franchising concept in the proper business perspective.

Thus, a potential franchisee should not purchase a franchise from any franchisor that he or she would not consider for a top employment position and a franchisor should not sell a franchise to any person he or she would not consider a top choice for a lifetime manager of a company-owned office. By the same token, a franchisor should give you the same care and support as he or she would give to his or her top managers of the company-owned outlets.