3 J. F. Comm. Franchising 1 (1983-1984)

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Volume 3, Number 1

ABA Forum Committee on Franchising

International Franchising-
A Brief Introduction
by Paul A. Lester*
Miami, Florida.

Franchising in the United States
sped through the 1950s and 1960s,
slowed somewhat in the 1970s and
is again picking up in new areas. It
is a dynamic industry in a dynamic
process, where often the franchise
concept itself seems like mercury-
very attractive but difficult to grab.
This article notes a number of ob-
servations on what a franchise is and
what activity has occurred based
upon   international experience.     Paul A. Lester
While a staff attorney at the Federal Trade Commission
from 1974 to 1977, my tellows and I grappled with the defi-
nition of the term franchise.' The FTC's Trade Regulation
Rule entitled Disclosure Requirements and Prohibitions
Concerning Franchising and Business Opportunity Ventures
defines this intellectual concept' even though many U.S. and
foreign commentators say that franchising is such a broad,
generic concept that it defies precise definition as a term of
art. 3
What Is a Franchise?
To paraphrase a former Supreme Court Justice, I can't
define a franchise but I know one when I see one. Our
foreign colleagues can attest to that. Perhaps a functional
analysis identifying key elements of franchising is the place to
start in seeking to define the concept.
The British Franchising Association has defined a fran-
chise as:
A contractual license granted by one person (the franchisor) to
another (the franchisee) which:
(a) Permits or requires the franchisee to carry on, during the
*Partner, Broad and Cassel, Miami, Florida.

period of the franchise, a particular business under or using a
specific name belonging to or associated with the Franchisor,
and
(b) Entitles the Franchisor to exercise continuing control during
the period of the franchise over the manner in which the Fran-
chisee carries on the business which is the subject of the fran-
chise, and
(c) Obliges the Franchisor to provide the Franchisee with
assistance in carrying on the business which is the subject of the
franchise (in relation to the organization of the franchisee's
business, the training of staff, merchandising, management or
otherwise), and
(d) Requires the Franchisee periodically, during the period of the
franchise, to pay the Franchisor sums of money in consideration
for the franchise, or for goods or services provided by the Fran-
chisor to the Franchisee, and
(e) Is not a transaction between the holding company and its sub-
sidiary (as defined in Section 154 of the Companies Act 1948) or
between subsidiaries of the same holding company, or between
an individual and a company controlled by him.'
(continued on page 14)
Elsewhere in This Issue
Chairman's Column ........................................... 2
Foreign Franchisors in the United States ..................... 3
Franchising Currents ........................................... 9
(Including: Tying Gasoline Purchase Requirements to
Grant of Leases: Trademark Rights May Be Unlawful;
Distribution Rights Not Terminable without Reasonable
Term and Notice in the Absence of Agreement; Fran-
chisors Experiencing Increased Exposure to Franchisees'
Customers Based on Vicarious Liability; Absolute Right
to Disapprove Transfer Upheld; and others.)

Copyright  1983 American Bar Association                                               Produced by the ABA Press

Summer 1983

Produced by the ABA Press

Copyright @ 1983 American Bar Association

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