Minneapolis franchisee lawyer Ron Gardner describes the legal qualifications for being considered a franchisee.
More In This Category
Whether or not someone is a franchise doesn’t have anything to do with what the agreement that they have with their franchisor says about being a franchise. In fact we see all the time agreements where someone has been told their a licensee or they’re a dealer and it will have a provision in the agreement that says you are not a franchisee. This is not a franchise relationship. That provision has absolutely zero effect. It’s there to scare you away. Whether someone is a franchise is a straight function of the legal analysis of whether or not someone meets the criteria of being a franchisee. Those three criteria are that you are given the right to use someone else’s trademark and trade name. That that someone exercises some amount of control over what you are doing. Or in some places all it really means is that we have a community or all that’s required is we have a community of interest, which means if I make money you make money. And number three is that I pay you some sort of fee for that and that fee can be direct, a royalty payment, a check that I write you at the beginning of the relationship. Or it can be indirect, that is you require me to buy things from you and you put a markup on that and so that you make money on the products that you require me to buy from you. And so if those three things exist you are a franchise and that can have big implications down the road for the nature of the relationship between you and the franchisor and the rights that you have in terms of the conduct that the franchisor engages in.