Franchising is a method of doing business by which a franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a Franchisor and which is substantially associated with the Franchisor's trademark, name, logo or advertising.

Three Elements of a Franchise

        A.    Use of a name
        B.    Use of a system or marketing plan
        C.    Payment of a fee greater than $500.00 within six months
          D.    The down payment shown for the franchise is not necessarily
                the  total investment needed to launch the business. The
                franchisor will assist in financing the total investment that is
                shown in the disclosure documents supplied by the franchisor.

(If a Business opportunity has these three elements, the Federal Trade Commission and the Utah Business Opportunity Disclosure Act require that who ever is selling the business opportunity must supply qualified disclosure documents.) It is  not unusual to have people selling business opportunities that qualify as franchises and by law do not have the proper documentation.

Kinds Of Franchises

        A.    Product/Tradename Franchise (Distributorship)

                    1.    Franchisor makes product distribution arrangements with
                           Franchisee.

                    2.    Franchisee is identified with manufacturer's name and product.
                           These older type of franchises are Automobile and
                           Truck Dealerships (General Motors), Gasoline Service
                           Stations (Exxon) and soft drink bottlers (Coca Cola). These
                           Franchises account for 65% of all franchise products and
                                 service sales, but have 39% of total franchise outlets.

        B.    Business Format Franchise

                    1.    Franchisor Establishes a Fully Integrated Relationship Which
                           Includes:

                            A. Product
                            B. Service
                            C. Trademark
                            D. Marketing Strategy and Plan
                            E. Operating Manuals and Standards
                            F. Quality Control
                            G. An On-Going Communication System

                    2.    A Business Format Franchise Ranges From Restaurants, Retail
                           Outlets to Personal Business Services, Rental Services,
                           and Lodging Industries. Examples: McDonalds, Century 21,
                           Hotel Chains et.

                    3.    Who should consider buying a Franchise?
                            A. People who prefer a carefully structured business format,
                                training and continuing support from an experienced
                                source. (The Franchisor)

                            B. People who have had experience working in the corporate
                                world often feel more comfortable with a franchised
                                business system rather than an entrepreneurial
                                one of a kind business.

                            C. Since starting a new franchise involves paying for the
                                franchise license and experiencing negative cash flow
                                for some period of time, people who purchase franchises
                                generally have strong financial resources.