Akerman Franchise Partners Dale Alexandra Cohen, and Marc A. Lieberstein, along with their Associate Emily N. Doan authored "Franchising: The Basics" to PLI Current: The Journal of PLI Press. The article offers practitioners and business owners a practical grounding in the federal and state legal framework governing franchising in the United States, from the threshold question of what constitutes a franchise to the ongoing obligations that govern the franchisor-franchisee relationship.
Dale, Marc, and Emily explain that franchising in the U.S. operates under a layered regulatory system in which the Federal Trade Commission's Franchise Rule establishes the federal baseline, while state law frequently imposes additional — and sometimes materially different — obligations. The authors examine the three elements of a franchise definition under federal law — the trademark element, the assistance and control element, and the franchise fee element — and explain how state definitions vary and when other business arrangements, such as licensing or distribution agreements, may unexpectedly trigger franchise regulation.
The authors then address the practical requirements of franchise sales compliance, including presale disclosure document requirements, disclosure timing, state registration processes, and the exemptions available under both federal and state law. They survey the non-traditional ownership structures — including private equity, publicly held entities, and employee stock ownership plans — that have become increasingly prominent in the industry.
The authors wind up their article with a look at the franchise relationship statutes that govern how franchisors may terminate, renew, and transfer franchises in the states that regulate these matters, and the civil and criminal penalties that can follow noncompliance at both the federal and state levels. They conclude by noting that successfully navigating the franchise regulatory landscape demands both a command of the applicable rules and close partnership with counsel who understands not just the law on the books, but the practical realities of how franchise regulation is administered.