Beware of the Franchise

by Kip R. Peterson and Dainel D. Ganter, Jr. Spring 2010  In Brief Newsletter Believe it or not, your business could be a FRANCHISE.  If so, failure to comply with applicable laws and regulations could result in serious consequences.  Ignorance of these laws and regulations is no defense. When most people think of a franchise they think of fast-food restaurants, fitness chains and hotels.  However, Minnesota law broadly defines the term “franchise,” potentially expanding the reach of the franchise laws and regulations to include legal arrangements such as license agreements, consulting agreements, and distribution agreements.  It is important to note that it doesn’t matter what the parties call their relationship.  If the elements of a franchise are met, the parties must comply with the franchise laws and regulations. Minnesota law defines a “franchise” as a contract or agreement between two or more persons which satisfies the following elements: (1) a franchisee is granted the right to engage in the business of offering or distributing goods or services using the franchisor’s trade name, trademark, service mark, logo or other commercial symbol or characteristics; (2) the franchisor and franchisee have a “community of interest” in the marketing of goods or services; and (3) the franchisee pays a franchise fee. Two of the three elements of…