International Law

Tips from The Cheesehead State about Franchising

Who knew the that the State of Wisconsin had such a neat little site on franchising, called What is a Franchise?

The site is written in plain language. Here are some examples.

"Franchising is a package deal!

To be a franchise under the Wisconsin Franchise Investment Law the deal must include:

1. a marketing plan (either required or suggested);
2. association with a commercial symbol (e.g., trademark); and
3. a franchise fee."

Notice that the State of Wisconsin treat the purchase of a franchise on par with the purchase of an investment -but the franchise purchase is typically hands on, while a securities investment by definition is passive.

The section on promises and obligations is excellent.

This a very good way of looking at what the real relationship is. Note that neither support nor training are typically obligations of the franchisor. Very revealing.

Here is warning from history:

"Franchising as a means of distributing products and services was not aggressively pursued until the 1950's and 60's. The booming popularity and growth of franchising, the profits which inured to franchisors, and oft-repeated stories of franchisees who "struck it rich" through franchising were accompanied by the abuse of that system by a few fly-by-night, unethical and, often, criminal operators. Futuristic Foods, Holiday Magic, Koscot Enterprises, and other such scams were horror stories of tens of millions of dollars of peoples' life savings invested in what they thought were businesses which would provide income, but which instead turned out to be schemes to defraud."

Good to know that doesn't happen anymore, eh?

Full post as published by Misleading Advertising Law on February 19, 2008 (boomark / email).