Chapter 18 - Understanding Franchising

Question 1

what is franchising?

Answer 1

method of distribution whereby a franchisor, who has developed a particular pattern or format for doing business, grants to franchisees the right to conduct such a business provided they follow the established pattern

Question 2

what do you need to look for in the franchise contract?

Answer 2

1) does the territorial grant meet the requirements of federal and states antitrust laws and federal trade commission regulations?
2) does the franchise grant make the franchisee an agent of the franchisor?
3) does the franchise contract require the franchisee to include the franchisor as a beneficiary on public liability and other insurance contracts?
4) under what conditions can the franchisor terminate the contract?

Question 3

why are there federal regulations governing the sales of franchise?

Answer 3

the federal trade commission has issued trade regulations entitled “disclosure requirements and prohibitions concerning franchising and business opportunity ventures”