What Exactly is Franchising?

The definition of franchising helps businesses determine if they are a franchise and therefore must be disclosed as such. In the U.S., the Federal Trade Commission and state regulatory agencies have developed a formal set of disclosure requirements and franchisespecific prohibitions that franchisors must follow in their relationships with their franchisees.

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Three Primary Elements Define A Franchise Relationship:

The use of a common trademark

The provision of assistance to the franchisee with a certain amount of control

The collection of fees, royalties, mark-ups, or other monies from the franchisee

• If you have all three elements, you are a franchise, regardless of what you call it

• Some state definitions vary, but are generally similar

• Some businesses are already franchising and do not even know it, and could face significant fines and penalties for violations