What is the history of franchising in the United States? What role did fast food and sewing machines play in creating the demand for franchises in the United States?  

Franchising actually began in the United States in the mid-1800's with Albert Singer and the Singer sewing machine. Albert Singer used franchising as a means of distributing his sewing machines throughout the United States.  He is credited as the first franchisor in the United States and the first to develop a franchise contract.

Franchising grew more fashionable in the mid-1900's when a new type of franchise popped up in the form of the retail and fast food chains.  Both the move to the suburbs at the time and the advent of the baby boom created the need for fast food and retail chains to develop in more remote areas outside of cities, thus creating the need for franchising these types of businesses. Read more »

Existing and former franchisees of a system can be a valuable resource and an important part of the due diligence or validation for anyone looking to buy a franchise.  Before you sign a franchise agreement or pay any monies for a franchise, make sure you have spoken to as many of the existing and former franchisees as you can and ask them what they like and dislike about the support and training they receive.  Both existing and former franchisees are listed as Exhibits to Item 20 of the Franchise Disclosure Document (FDD).  If there are 500 franchisees in a system you are considering, I would speak to at least 50 of them around the country and all of the former franchisees you can reach.   Read more »

The following is a list of the top ten commercial lease clauses about which a tenant should be most concerned.  Here is my top 10 list for the most negotiated clauses:

1) Rent - When does it commence; what is the base rent; will there be percentage rent.

2) CAM - Stands for "Common Area Maintenance Charges" - this is the additional rent that includes all of the costs that the Landlord expends for maintaining the shopping center or office building. The costs are apportioned to each tenant on a pro rata basis based on square footage (see my prior blog post on Common Area Maintenance charges). Consider a cap on charges and exclusions from items included in CAM charges.

3) Personal Guaranty - is a personal guaranty required, if so, can it be limited in time or amount.

4) Term - When does the lease commence - does it commence when the lease is signed, when the keys are turned over to the tenant, when the tenant opens for business or some time after that. Read more »

What do you need to know before you invest in a franchise?  I always tell my prospective franchisee clients that they should find out as much as possible about the franchise and the business.  The following are some suggestions on questions to ask the franchisor and things to learn about the franchise before you invest in a franchise opportunity: Read more »

What do you need to know to create a franchise of your business from a legal perspective? You have a successful business concept.  You may have even had inquiries regarding buying a franchise of the business concept.  To franchise your business you will need a federally registered trademark, compliance with the FTCs requirement of a disclosure document (FDD) and legal compliance with certain state requirements. This post will discuss the legal aspects of franchising your business.

First, you must have a federally registered (or at least applied for) trademark with the US Patent and Trademark Office. Registration of your name and logo will protect the name and logo from others attempting to copy your name and/or logo. However, you should know that anyone using the name or logo prior to your use, has priority rights to that name and/or logo for their marketing area. The trademark and other intellectual property (trade dress, etc.) is the cornerstone of what someone will be licensing from you when they buy a franchise from you. Read more »