Franchise Explosion

History In The Making

In 1995, franchising was marked by at least one truly earth-shattering first. Franchisees were permitted to attend the White House Conference on Small Business in June after being banished from the previous two conferences in 1980 and 1986. Of 2,000 total attendees, the 137 franchisee delegates may have been relatively small in number, but they managed to get two important measures onto the conference's list of 60 final recommendations.

One measure would give franchisees more latitude on the issue of where to conduct mediation, arbitration or litigation with their franchisors; the other was a recommendation that would establish minimum standards and give franchisees more rights. Andrew Selden, a Minneapolis franchise attorney, says the conference was a milestone because "it elevated franchising to a much more visible position in the American economy."

Selden says another major milestone, which took place last August, was the Kodak case, in which a jury awarded more than $20 million to franchisees. In the lawsuit, the plaintiffs claimed Kodak attempted to monopolize the market that serviced its own photocopiers. Selden believes this could have broad implications for certain franchise systems. In the future, he says, "business-format franchisors that attempt to monopolize aftermarket supply arrangements in their system could be liable for violation of federal antitrust laws."

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This article was originally published in the January 1996 print edition of Entrepreneur with the headline: Franchise Explosion.

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