FRANCHISING PRIMER -

I. INTRODUCTION -

A. In General Franchising is a method of distribution that combines the advantages of a central specialized system with the capital and micro-management of local independent business persons to produce a market competitor with critical mass. Its inherent geographic expansiveness and long term business relationships cause franchising to be affected by an array of dynamic federal, state and local laws. The application of this collection of laws to franchise relationships is referred to as franchise law.

The Federal Trade Commission ("FTC") promulgated the Franchising and Business Opportunity Ventures Trade Regulation Rule 16 C.F.R. § 436 (The Rule) in 1979 to protect prospective franchisees from deceptive franchise sales practices. Eighteen states now have franchise statutes and twenty-four have business opportunity laws, most requiring written pre-sale disclosure to prospective buyers and some requiring pre-sale registration and regulating the parties' relationship. The Appendix A chart identifies these statutes.