I am often asked “When considering franchising your business, what are some of the most important issues?” Here, I will examine one of those issues: why is franchising your business important?

As a professional in franchise consulting and development, I am often asked questions such as “Why go through all the steps of franchising your business? Wouldn’t it be easier to just call the concept a dealership or joint venture and skip all the legal requirements of franchising your business?”

We must look at the legal definition of a franchise to find the answer to this question about franchising your business.

Over time, U.S. courts have found a franchise has three elements:

  1. The use of a common name
  2. The payment of a fee
  3. The rendering of substantial assistance

The courts’ reasoning is basically along the following:

  • Franchising your business is not that difficult. After all, thousands business owners in the U.S. have successfully completed the process of franchising their business.
  • Franchise laws incorporate various protections for both franchisees and franchisors.
  • It is in the best interests of both parties to have the benefit of these protections.

Therefore, courts tend to hold a business relationship is a franchise if it meets the above three elements. It doesn’t matter what you call it — a dealership, license or joint venture — the courts will find it a franchise if it meets these three elements when franchising your business. It is important remember this legal definition when deciding about franchising your business.

A court has held that helping a “licensee” develop a marketing plan meets the element of rendering substantial assistance. The payment of a fee as little as $500 has been deemed to meet the legal definition of a franchise.

If you are contemplating offering business opportunities that involve the payment of a fee, a common name and helping the purchaser, then I advise you to carefully explore whether you are offering a franchise. If franchising your business, do it properly.

Thinking About Franchising?

NFA Franchise Consultants have the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.