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Webster's Dictionary defines “franchise” as 1. A privilege or right
granted a person or a group by a government, state, or sovereign. 2.
Authorization granted by a manufacturer to a distributor or dealer
to sell his products.”
The word "franchise" comes from Old French meaning privilege or
freedom. As economies evolved, so did the concept of franchising. It
is believed that our current concept of franchising comes from the
mid 1800s when a major German ale brewer granted certain taverns the
exclusive right to sell their ale.
The definition of a franchise under federal law and most state
laws regulating franchises defines a franchise as having 3 elements:
(1) a shared trademark, (2) substantial control by or assistance
from the franchisor, and (3) payment of a fee by the franchisee to
the franchisor. The existence of these 3 elements may cause a
business to be considered a franchise, even if it is called
something else, such as a licensing arrangement or a
distributorship.
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The International Franchise Association (IFA), the major trade
association in franchising, defines franchise as a "continuing
relationship in which the franchisor provides a licensed privilege
to do business, plus assistance in organizing, training,
merchandising and management in return for a consideration from the
franchise."
Franchising is a successful method of distributing goods or
services to consumers. The franchise system owns the right to the
trademark of the business. The franchisee purchases the right to use
the trademark and operating system.
Most people associate the word "franchise" with fast food
restaurants. But, there are many more types of franchise businesses,
including everything from advertising to automobile repair, printing
services to party supplies and many more. |
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