The franchising concept caught on in the 1950s and ‘60s with the beginning of companies such as McDonald's and Holiday Inn. Today, every product or service imaginable can be distributed through the franchising industry as is witnessed by the measurable economic activity generated by franchise operations in the United States. During its early history, though, franchise developments were marked by unprincipled franchisors that misrepresented earning claims, causing the ruin of many novice investors. Recognizing the disparity in the bargaining positions of the franchisor and franchisee, state and federal governments regulated the offering and maintenance of franchise relationships, most notably through the Federal Trade Commission’s (FTC) Franchising Rule that establishes a minimum for disclosures a franchisor must make before negotiating a franchise relationship for any business affecting interstate commerce. Although the basic franchisor-franchisee partnership is contractual, the complex nature of the relationship has brought franchising under the scrutiny of several areas of governance, including trademark, trade secret, patent, copyright, licensing, agency, antitrust, trade regulation, unfair competition, securities regulation, and contract.

Upside teams with attorneys who specialize in franchise law and structuring new franchise systems from concept to start-up—even if that means recommending that clients not structure their business as a franchise, in which case we work with them to establish an appropriate business format that allows them to realize their business goals. Services that assist franchise operators with the sensitive legal areas of the industry include:

• Drafting franchise agreements and collateral documents
• Drafting and filing franchise disclosure documents
• State registration of franchise offers, and counseling on compliance with all elements of disclosure regulation
• Advising companies regarding franchise compliance with Internet advertising restrictions directed at the offer of franchises and business opportunities
• Advising companies on trademark clearance and prosecution and intellectual property protection
• Advising companies on establishment of franchisee territories and exclusivity
• Counseling clients on franchise relationship issues including terminations, transfers, buy-backs, restructuring and conversions
• Advising companies on structuring initial franchise fees, royalties and advertising funds
• Preparing and filing state business opportunity registrations, including antitrust and trade regulation, finance, government relations, litigation, corporate and securities, environmental, labor and employment, intellectual property, real estate and business reorganization and bankruptcy.

After developing the franchise model, Upside works with attorneys who specialize in franchise law to draft necessary documentation, including the Franchise Disclosure Document (FDD), franchise agreement, area development addendum, and other ancillary documents such as non-disclosure and non-compete agreements and personal guaranties. Upside agreement documentation is commercially reasonable and marketable and provides franchisors with flexibility, control and protection. Upside also develops the operations manual, which is required by federal law and contains the detailed information necessary to enable franchisees to establish and operate their franchise operations.