Have you ever noticed when you are out in your local shopping district just about everywhere you look there is a McDonalds, Taco Bell, or Pizza Hut? These types of businesses are known in the business world as franchises. The franchise is a business that is individually owned but it is licensed to operate under the umbrella of a major corporation, as Henry Cheeseman states in chapter 40 of his book Business Law, a franchise is a separate corporation from a corporation. When a person purchases a license to become a franchise such as Domino’s Pizza, it allows the person who purchased the license to use that entity’s trademark, trade name, products and trade secrets. There are certain rules and guidelines that have been established by the Franchisor that the franchisee; the purchaser, has to agree to follow when purchasing the business, (Daszkowski, 2012). According to Cheeseman, there are four basic classifications of franchises with the first being distributorship franchise. This type of franchise is when a manufacturer such as Toyota makes a vehicle and provides a license to a dealer to sell that product. The second type of franchise is the processing plant franchise. With this type of franchise, a business like Coca Cola will license a regional manufacturer to use their secret formula to manufacture and distribute their product. The third type of franchise everyone is most familiar with is the chain-style franchises like Taco Bell or KFC and finally, the fourth type of franchise is known as an area franchise. The best example of an area franchise is ACE Hardware. An area franchise is when a franchisor grants openings of franchises in particular areas. Ace Hardware has 4500 stores in over 60 countries, (ACE Hardware International, 2012). According to Don Daszkowski, in his article for About.com, there are over 120 different types of franchises that are available in the market today, (Daszkowski, 2012). The advantages of being a part of a franchise…
