Franchising has proven to be a very popular business model since its inception. It`s easy to see why. Franchising offers companies the opportunity to grow quickly and cheaply in different markets. A company will fulfill this mission by licensing its name and brand and selling its property or business format to independent franchisees for a fee. The franchisee also benefits from such an agreement. By entering into a franchise relationship, a franchisee can effectively manage their own business without having to invest a lot of time and money to perfect a new property or business method. In other words, franchisees benefit from the knowledge, experience, research, development, capital and reputation of their franchisor. The simple entry into a franchise relationship offers a partial explanation for the success of franchising. In the United States, franchises account for one-third of all retail sales, with about 750,000 operating franchises employing more than eight million people.
U.S. franchising indirectly accounts for more than twice as many jobs, while bringing in more than $1.5 trillion in annual retail sales. The American concept of franchising is spreading rapidly around the world, with a growing share of international trade. Despite this success – or perhaps as a result – franchises have had their fair share of problems. In an attempt to protect franchisees, many state legislators and the federal government have developed rules, similar to consumer protection laws, regarding correct disclosure obligations for franchisors. McDonald`s Hamburger University is an example of the latter provision. Determining the application of the duty of good faith requires proof of the intentions and expectations of the parties under the franchise agreement, but only if there are “deficiencies” in the contractual language. . . .