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A franchise, by definition, is an authorization granted by a government or company to an individual group enabling them to carry out specified commercial activities.

A franchise, by definition, is an authorization granted by a government or company to an individual group enabling them to carry out specified commercial activities. In order for both parties to make this work, an agreement, or franchise contract needs to be put in place before the business will begin. A franchise contract is the legal agreement that creates a franchise relationship between a franchisor and a franchisee. Before this contract is signed, the US Federal Trade Commission regulates information disclosure under The Franchise Rule. The franchisee purchases the controlled rights (trademark) which they are then able to sell the franchisor's goods or services. Anything done outside of the terms of the contract can be considered a breach and can lead to financial and legal liabilities as well as a rocky reputation. Therefore, the rights to control and power allowed should be carefully considered. The type of legal form I prefer for my own small business is sole proprietorship or an LLC.

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