Franchises in the USA

History of franchises in the United States

The International Franchise Association (IFA) and the American Franchise Association (AFA) were formed to combat abuse in the industry. IFA developed a code of conduct for licensors and AFA formed a trade group to represent the interests of franchisees.

In 1978, the Federal Trade Commission (FTC) adopted its own set of rules and regulations.

Today, many states regulate the franchise industry.

More than 300,000 small franchised businesses operating in the United States represent an estimated income of $ 1 trillion each year and provide employment to some eight million Americans.

An agreement between a franchisor and a franchisee generally consists of the following:

• There is a transfer of products, know-how and proprietary information developed by the licensor, either as a product or as a commercial format, which enables the licensee to conduct business.

• Trademarks or service marks are licensed, so business is conducted under a common name or type of logo.

• There is an exercise of some type of control by the franchisor over the manner and methods of the franchisee and / or the conduct of his business.

• And of course there are payments from the franchisee to the franchisor. These payments can be seen as upfront fees, ongoing royalties, product charges, etc. Royalties are normally collected on the gross income of the licensor. Gross income is often described in different and complex ways and care must be taken when analyzing these charges.

Franchise agreements can be complex and complicated. An interested buyer should consult with experienced professionals and legal advisers.

Franchised companies have higher success rates than non-franchised companies. Sometimes, however, the income of business owners is not what they expected or expected.

A business opportunity company, can be considered a franchise and be covered by applicable laws, if the following are present:

• The licensee sells goods or services provided by the franchisor, or possibly by other companies. The licensor can instruct the licensee where to buy the goods or services, or he can sell the goods or services through a related company or business.

• The franchisor finds, rents, subcontracts, etc., business premises or retail sites for the products or obtains locations, for example, vending devices or shelves.

• The licensee pays at least $ 500 to the licensor within the first six months of the franchise.

Once considered a franchise, the costs of disclosure and compliance can be substantial.

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