The US franchises law is quite complex, as it has federal and state components and it varies from state to state. The Federal State Commission, along with corresponding state agencies, governs franchising in the US. The common franchising rules set up by the FTC apply to all the franchises all over the country. The state rules apply if the franchisees are residents of that state or the franchise will be established in that state or the franchise sale happens in that state.
According to the federal franchise law, a franchise has three elements namely,
A significant control is exerted by the franchisor. The various areas of significant assistance or control include but not limited to,
The franchise can sell products bearing the trade name, logo, trademark, commercial symbol or service mark of the franchisor. The franchisee must pay minimum USD500 to the franchisor before opening the franchise or within six months of opening it. Other required payments include, Training fees, Royalties, Franchise fees, and Service payments.
The common elements of a franchise according to the state franchise laws as followed by most US states are,
The franchises are regulated by three categories of laws namely,
The US franchise law prohibits the selling of unregistered franchises. Misrepresenting facts about the business opportunity to the prospective franchisees, non-renewal or illegal termination of the franchise, not providing the UFOC at the required time and not disclosing everything required in a UFOC are violations under this law.