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Franchising and Franchise Law
January 2013
Howard Yale Lederman
Summary
This article by the Michigan Bar Journal reviews the history of franchising and the initial reasons franchise laws were enacted. After 1945 when franchising became popular across the nation investors were lured in by enticing promises of large profits. Large power imbalances in the franchisor-franchisee relationship increased the likelihood of fraud and spurred state legislatures to act. Legislation such as the Michigan Franchise Investment Law were enacted to protect franchisees.
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Policy Implications
As franchisors seek to aggressively expand their business it is important that state and national authorities take the proper precautions to protect franchisees and consumers. To guarantee that investors are not being defrauded it is important that disclosure regimes are up to date. Franchising has become a major industry in the United States and will continue to be in the future. Making sure that fraud is kept to a minimum is crucial.