The Definition of Franchise

The question “What can I expect to see when I look into buying a franchise” can be a difficult one.  Many states and cities have different and overlapping rules.  It’s best to start at the beginning, with the simplest element, which is the federal definition of a franchise.

On the federal level, a franchise is “a right granted by a government or corporation to an individual or group of individuals.”  This federal definition originally dealt with the concept of voting rights (we’ve all heard of the disenfranchised voter), and over the years has expanded.  However more currently the term is defined as “permission granted by the government or by a company to take a certain action.” Today’s more commonly used version of the term applies to business entities, for example when Starbucks gives an investor permission to open a Starbucks outlet. Understanding this basic federal definition is a good jumping off point for working through various states’ iterations on how the term “franchise” is defined.

By Todd Rudge


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