Franchising in the U.S.

Franchising is an excellent method for the distribution of products and services for a business which:

1. Is capital intensive or management intensive;
2. Has profit margins sufficient to support an additional entity, the franchisee; and
3. Can provide valuable services the franchisee cannot obtain independently.

Our firm can provide a franchise feasibility study regarding structure, franchise fees, royalties, intellectual property protection, capitalization, etc. to see if you meet the desired criteria for franchise success.

Our firm has long provided assistance to franchisors for fast food, retail, services, products, and other types of businesses.

Representing franchisors involves a variety of legal questions such as employment law, protection of intellectual property, corporate and tax strategies, real estate leasing, and lending. Our firm's vast experience and breadth gives you an advantage in dealing with legal issues. Our firm is a member of the Forum on Franchising and International Franchise Association and our attorneys have spoken on franchising and trademark topics at numerous seminars. When the franchising regulations last changed, one of our attorneys chaired the regional seminar in Seattle, Washington on the New Uniform Offering Circular.

Definition of a Franchise

Many states laws define franchises for different purposes. Most states employ a marketing plan or system definition or community of interest definition. Thus most state definitions follow that there is a franchisee relationship if: (a) the franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in large part by a franchisor; (b) the operation of the franchisee's business pursuant to such plan or system is associated substantially with the franchisor's tradename, trademark, service mark, advertising or other commercial symbol designating the franchisor or its affiliate; and (c) the franchisee must pay a franchisee fee. This is the predominate state definition. The state courts have given broad application to these definitions and where there is a trademark being utilized and some type of a system or look, you generally have a franchise. The franchise fee requirement is usually easily reached by the court because they will apply any type of consideration whether its money or not as a franchise fee. No matter how you characterize your organization, if you meet the above definition, then you are a franchisor.

Franchise Registration

• FTCThe Federal Trade Commission rules require all franchisors, even if exempt from State registration, to comply with federal pre-sale disclosure requirements thus necessitating the preparation and delivery of an Offering Circular in a prescribed format including the franchise agreement and various audited financials. These financials often cost more than the documents. There is no federal filing requirement. The federally prescribed disclosure documents need to be presented to a prospective franchisee and a receipt signed ten days before any agreements are signed.
  
  
• StatesIn addition to FTC compliance, many states also require special formats and changes to the FTC format and also require registration. Penalties for non-compliance include criminal liability since violation of state registration requirements is a felony. Registration is often an involved process and may include the establishment of an impound account to guaranty franchisor performance. Our firm has extensive experience in these registrations.

Trademarks

We believe it is imperative you consider at this time a federal trademark registration for all your marks and logos. The first step is a trademark search to determine if there are already confusing marks. A federal registration takes a minimum of approximately nine months. Hence, you will want to commence the application process immediately. Our office handles a large number of trademark registrations and has developed an efficient high-quality system for searches and registrations. To start the process we will need the date of first use of the mark anywhere and the date first used in interstate commerce. We will also need three specimens which are identical and which show the mark as actually used.