Fractional franchise – The franchise is housed in a clearly demarcated area of an established business, usually one that is active in a related sector. Fractional franchise means any relationship in which the person described therein as a franchisee, or any of the current directors or executive officers thereof, has been in the type of business represented by the franchise relationship for more than 2 years and the parties anticipated, or should have anticipated, at the time the agreement establishing the franchise relationship was reached, that the sales arising from the relationship would represent no more than 20% of the sales in dollar volume of the franchisee for a period of at least one year after the franchisee begins selling the goods or services involved in the franchise.
Fractional franchisee’s total sales could be calculated in one of four ways. Specifically, the increase in product sales attributed to the fractional franchise relationship could be measured against: (1) the fractional franchisee’s total sales for that type of product; (2) the fractional franchisee’s total sales at the store where the new product is sold; (3) the fractional franchisee’s total sales at all franchised units; or (4) the fractional franchisee’s total sales from all businesses (franchise and non-franchised), regardless of the source.
