Want Franchise With That?

Today, franchising's power is pretty hard to ignore. Filling strip malls and plazas, spreading over borders and oceans, franchising is making its way into every corner of the world and is servicing many needs in our lives. In the United States alone, nearly $1 trillion a year in sales are rung up at franchised outlets.

But only 25 years ago, franchising's place in the world was a lot less certain. While many of today's big players, like McDonald's and Holiday Inn, were enjoying franchising success back then, the franchising industry was still suffering from a bad reputation, dogged by lawsuits and horror stories about get-rich-quick schemes and fraudulent business opportunities.

"In the late 1960s, franchising and fraud became almost synonymous," says David J. Kaufmann, a franchise attorney with New York City-based Kaufmann, Feiner, Yamin, Gildin & Robbins Inc. "Those days, thank goodness, are long gone. The federal and state disclosure laws that some franchisors view as a burden were actually a savior for the franchising industry. Those laws have almost completely eradicated franchise fraud and criminal involvement in the franchise arena."

This article was originally published in the May 2002 print edition of Entrepreneur with the headline: Want Franchise With That?.