. . . you may be a franchisor!

With apology to popular comedian, Jeff Foxworthy, for mimicking his style of delivery – we write this piece to those of you who are “unintentional franchisors” to dramatize the situation you’re really in.  Many business people delude themselves into thinking they are not franchisors when they really are.

If you allow other businesses to use your name or trademark . . . you may be a franchisor!

If you allow other businesses to use your business model . . . you may be a franchisor!

If you charge people a fee before they can open a business like yours . . . you may be a franchisor!

If you collect a royalty from businesses like yours, but owned by other people . . . you may be a franchisor!

If you can demand that businesses use your specs in operation of their business . . . you may be a franchisor!

If you call your business model, licensing . . . you may be a franchisor!

If people can’t change or modify their business unless they clear it with you first . . . you may be a franchisor!

If you compel businesses like yours to operate only within a certain territory . . . you may be a franchisor!

If you compel businesses like yours to buy their goods and materials from you exclusively . . . you may be a franchisor!

Federal law broadly defines a franchise as a commercial relationship in which one grants permission to operate a business in conjunction with a trademark; the owner of the trademark provides some level of support or control; and there is a payment made to the owner for use of the mark.

Pretending your operation is not a franchise, and therefore not having the proper legal documents, and registrations, puts you and your business at risk for lawsuits, fines, and regulatory actions by state and Federal agencies.  Is it worth taking the risk?

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Filed under Franchise Basics

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