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Avoiding the Accidental Franchise: Best Practices for Structuring Licenses or Distribution Agreements

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, September 28, 2021

Recorded event now available

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This CLE course will guide business counsel in determining when arrangements intended as licenses or distribution agreements could inadvertently result in creating a franchise. The panel will discuss strategies for structuring these arrangements to avoid an accidental franchise.


Franchises are highly regulated arrangements that require substantial disclosure documentation and other compliance efforts. Licensing and distribution arrangements are lower-cost, less-regulated alternatives. Misclassifying a business relationship as a license or distribution arrangement is a common and costly mistake when it is a franchise.

A poorly drafted license or distribution agreement can result in the accidental creation of a franchise subject to complicated and demanding laws. Significant consequences, including damages and rescission of franchise agreements as well as fines, penalties, freezing of assets, restitution, and personal liability of a company's management, can flow from noncompliance with franchise laws. It is a felony to violate franchise sales laws.

Business counsel can help clients avoid missteps by understanding the thin line separating a franchise from a non-franchise license or distribution arrangement and advising clients about structuring strategies to help avoid creating an inadvertent franchise.

Listen as our authoritative panel provides perspectives on drafting licenses and distribution agreements to avoid creating an accidental franchise. The panel will also discuss best practices for complying with federal and state franchise and business opportunity laws once an inadvertent franchise is established.



  1. Determining whether a business constitutes a franchise
    1. Three-prong analysis
    2. Variance among federal and state law definitions
  2. Strategies for drafting licenses and distribution agreements to avoid accidental franchises
    1. Trademark use
    2. "Marketing plan," "community of interest," or substantial assistance/significant control
    3. Franchise fee
  3. Complying with federal and state franchise and business opportunity laws once a franchise is established
    1. Franchise sales laws
    2. Franchise "relationship" laws


The panel will review these and other crucial issues:

  • How do franchise arrangements differ from non-franchise licensing and distribution agreements? What are the pros and cons of each?
  • What risks do businesses face if they inadvertently misclassify their franchise as a non-franchise license or distribution agreement?
  • What federal, state, and foreign franchise laws apply when a business is determined to be a franchise, and what are the key legal requirements of each?


Spandorf, Rochelle
Rochelle (Shelley) Spandorf

Davis Wright Tremaine

Ms. Spandorf focuses her practice on business franchise and distribution issues, representing franchisors,...  |  Read More

Tractenberg, Craig
Craig R. Tractenberg

Fox Rothschild

Mr. Tractenberg is a skilled international litigator who handles complex business disputes involving intellectual...  |  Read More

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