Franchised businesses account for approximately 40 percent of retail sales in the U.S., more than a trillion dollars a year, and have about 10 million employees. Franchising is growing: a new franchise opens in the U.S. roughly every eight minutes of every working day. Although most people may associate franchising with “fast food restaurants,” franchising is prevalent in many areas of the economy, including automotive, hotel, various retail establishments, and numerous business services, among others. With the explosive growth of franchising, which really began in the 1950s, has come the development of franchise law as a separate discipline during the past 60 or so years and significant growth in the number of lawyers who practice in this field. Thus, franchising and the evolving practice of franchise law have a great practical impact on the U.S. and global economy.
Franchise law is a combination of contract and statutory law and is heavily influenced by trademark, antitrust and other areas of business law. Franchise agreements tend to be lengthy multi-year trademark licensing agreements. Because franchising involves distribution of goods and services, antitrust and other competition law considerations must be taken into account. Franchising is also regulated at both the federal and state level. Franchise sales are regulated by state and federal disclosure requirements, analogous to SEC requirements. Automotive, petroleum and certain other franchise relationships are regulated by specific statutes, while various states generally regulate aspects of the franchise relationship, such as termination or renewal of the relationship. There is a substantial amount of litigation in franchising, involving not only disputes between franchisors and franchisees, but also consumers and others. Many common law contract concepts, such as the “implied covenant of good faith and fair dealing,” have evolved and continue to evolve in the context of franchise law. Franchising is also growing rapidly outside the U.S.; accordingly, a variety of laws and regulations of other countries are relevant.
This course will cover the legal and practical business basics of franchising, including, structuring of the franchise relationship and the analysis of franchise agreements; the sales process and disclosure requirements; the relationship of franchising, employment, trademark and antitrust law; contract and other common law concepts that affect the franchise relationship; statutes regulating the franchise relationship at the state and federal level; automobile, petroleum and international franchising; and franchise-related litigation. Students will be evaluated on the basis of a paper and class participation, including mock negotiations at the end of the semester.