Elgar Intellectual Property Law and Practice series
Chapter 2: DECONSTRUCTING THE CONTEXTUALISATION, ARCHITECTURE, RATIONALE AND RISKS OF FRANCHISING
This chapter seeks to show that although franchising is a specific, distinct and uniform type of commercial activity with a positive influence in the EU which stimulates economic activity by offering economic advantages to all those involved, improves distribution and gives business increased access to other member states, it is not fulfilling its full potential to contribute to the realisation of the single market. In order to understand the reasons for this underper- formance in the EU and the way in which the regulatory environment might be re-engineered to improve franchising’s contribution to the single market, this book endeavours to better understand what franchising is. It does this by analysing both the economic and legal features of the architecture of franchising, distinguishing it from agency and distribution, identifying the tensile stresses that arise within franchising and deconstructing the economic and sectoral contextualisation of franchising and its economic rationale and risks. It con- cludes that, despite the impact of variable determinants such as the value of the investment required from franchisees and the commercial sectors in which the business operates, the architecture of franchising comprises six fundamental features that are always present.These are independence of the parties, economic interest, use of a brand, use of a business format, control of the franchisee by the franchisor and assistance provided to the franchisee by the franchisor. This architecture withstands the tensile stresses placed upon franchising by its long term and dynamic nature.
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