Franchise law and other commercial law solutions deal with the franchising business model. In franchising, a company licenses its intellectual properties, corporate goodwill and business model to other individuals or companies, allowing them to quickly expand, and it is a good alternative to having multiple locations owned by one individual. The chain store model requires a significant investment at start up and throughout operations; however, franchising allows a parent company to pass many expenses on to the person or company licensing the franchise rights.
The Franchise Model
In a franchise, the licensing company allows other companies to use its business model, distribution network, products and name. The franchisee pays royalties to the franchisor for the use of such properties and they get access to the sources from which the franchisor buys its products. While the franchisor takes on a supplier’s role, the franchisee handles day-to-day operations.
America’s Franchising Culture
The US has a franchising history that dates back to the 30s when it gained popularity among motels and fast-food restaurants. There are thousands of franchised businesses generating billions in profits and accounting for almost 9% of all jobs in the US. Examples of franchises include McDonald’s, 7-Eleven, and numerous others.
Franchising’s Legal Issues
Every party participating in a franchise agreement has certain needs for legal counsel. A franchisor protects the trademark, controls the business idea, and secures the business model, and they must also consider the legality of shipping and distribution models, the franchising system’s tax ramifications and the potential for liability it may incur as the result of a franchisee’s actions or inaction.
Conversely, franchisees must carry out services the trademark is known for. Standardization is key, and it is typically enforced through strict contracts referred to as franchise agreements; for instance, a franchisee has to display a franchisor’s logos, signs and trademark, and must adhere to a dress code and meet minimum standards for customer service.
If a person is looking for information on franchising and the legal consequences that accompany it, they should review the information found above. Moreover, they should find an attorney if they need answers to questions, or help with preparing or reviewing a franchise agreement. By visiting Legalphilly.com for commercial law solutions, a franchisee or franchisor can resolve disputes and ensure the continued smooth operation of their business.
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