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Defining Moment

A new franchise definition?

This story appears in the May 1998 issue of Entrepreneur. Subscribe »

A recent decision by a Court of Appeal has manycompanies shaking their fists and shaking in their boots. Choosingto uphold a lower-court decision, the Court of Appeal found thatindependent sales agents for Dallas-based BusinessSystems Inc. are protected under the California FranchiseInvestment Law.

In 1992, 10 distributors brought a class-action suit with 17claims against office products manufacturer Safeguard. The courttried only one issue: whether the distributor/Safeguard businessrelationship constituted a franchise agreement. A California judgeruled for the plaintiffs, granting each of them a $6,000settlement. Safeguard then took the case to the Court of Appeal,but it upheld the prior decision--and Safeguard filed a newpetition with the California Supreme Court in March.

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