Franchising

Franchising is a kind of licensing arrangement wherein a business owner, known as the "franchisor," distributes or markets a trademarked product or service through affiliated dealers, who are known as "franchisees." While these franchisees own their establishments, terms of franchising agreements typically require them to share operational responsibilities with the franchisor.

Over the past few decades, franchising has emerged as an integral part of America's commercial landscape. Indeed, companies as diverse as McDonald's, The Gap, and Jiffy Lube owe their ubiquitous presence in the marketplace to the practice. Department of Commerce figures indicate that franchises exceeded $1 trillion in annual sales in the year 2000. The International Franchising Association (IFA) estimates that 40 percent of all U.S. retail sales took place in franchise outlets in the early 2000s. Although the U.S. Census Bureau has not counted franchises in previous Economic Censuses, International Franchise Association President Matthew Shay announced in a late 2005 press release that plans were being finalized by the Bureau to include questions about franchising in the 2007 Census of Business.

Franchising has been embraced by many entrepreneurs eager to run their own company. But the characteristics of a franchising business are dissimilar in some crucial respects from those of other start-up businesses. Some businesspeople have even gone so far as to characterize franchisees as glorified employees of the franchisor, the company that owns the trademark and business concept that the franchisees use. Other observers find this description of the relationship to be misleading and simplistic, but they also acknowledge that there are many aspects of franchising that a prospective small business owner should learn about before entering into such an agreement.

Three different kinds of franchising arrangements are commonly found in the United States today. Business format franchises are the most popular of the franchise types. Under this arrangement, the franchisee pays an initial fee and an ongoing royalty to the franchisor in exchange for a proven business operation and identity. Benefits of this package include the franchisor's name and its product line, marketing techniques, production and administration systems, and operating procedures. A second option is to pursue a product or trade name franchise in which the franchisee becomes part of a franchisor's distribution network. Some small business owners choose to combine their resources under the banner of a single operating network. These affiliate franchises are thus able to pool their assets together for purchasing, advertising, and marketing visibility purposes.

BENEFITS OF FRANCHISE OWNERSHIP

There are many significant advantages to franchise ownership. In most instances, an entrepreneur who decides to buy a franchise is purchasing a business concept with a proven track record of success. In addition, a franchise agreement provides instant name recognition for the business, which can be a huge advantage if the name enjoys a solid reputation in the marketplace. But franchising provides benefits in many other areas of business operation as well. These include:

Advertising and Promotion Franchisees benefit from any national advertising campaigns launched by the corporation with which they have gone into business. In addition, many franchisors provide their franchisees with a wide range of point-of-sale advertising materials, ranging from posters to mobiles to brochures. Since such materials are often expensive to produce, they would otherwise be beyond the reach of some individual franchisees.

Operations Franchisors provide franchisees with a wide range of help in the areas of administration and general operations. The entrepreneur who becomes a franchise owner is instantly armed with proven products and production systems; inventory systems; financial and accounting systems; and human resources guidelines. Many franchisors also provide management training to new franchisees, and ongoing seminar workshops for established owners.

Buying Power Franchisees are often able to fill inventory needs at discount prices because of their alliance with the franchisor, which typically has made arrangements to buy supplies at large-volume prices. This is an increasingly great advantage because today one has to compete with national chains, conglomerates, buying consortiums, and other large franchises. The small-business person who purchases in small quantities can not easily compete in terms of buying power. By becoming a franchisee, a business has the collective buying power of the entire franchise system.

Research and Development Most small business owners are able to devote little time or money to research and development efforts. Franchising, then, can provide a huge lift in this regard, for many franchisors maintain ongoing research and development systems to develop new products and forecast market trends.

Consulting Services It is in the franchisor's best interests to do all it can to ensure the success of all of its franchisees. As a result, the entrepreneur who decides to become a franchisee can generally count on a wide range of training and consulting services from the larger company. Such services can be particularly helpful during the startup phase of operations.

DRAWBACKS OF FRANCHISE OWNERSHIP

While the benefits of franchising are many and varied, there are well-documented drawbacks that should be considered as well. These include:

Cost The initial franchise fee, which in some cases is not refundable, can be quite expensive. Some fees are only a few thousand dollars, but others can require an up-front investment of several hundred thousand dollars. In addition, some franchisors require their franchisees to pay them regular royalty fees—a percentage of their weekly or monthly gross income—in exchange for permission to use their name. Some franchisors also require their franchise owners to help pay for their national advertising expenditures. Other costs include insurance, initial inventory purchases, and other expenses associated with equipping a new business.

Limited Control

Franchisees are subject to many franchisor regulations concerning various aspects of business operation and conduct. As the Federal Trade Commission (FTC) acknowledged to prospective franchisees in its Consumer Guide to Buying a Franchise, "these controls may significantly restrict your ability to exercise your own business judgment." Areas in which franchisors generally wield significant control include the following:

Site Approval—Many franchise agreements include stipulations that give the franchisor final say in site selection. Some franchisors also limit franchise territories, and while such restrictions generally prevent other company franchisees from impinging on your territory, they can also act to restrict your ability to relocate once you have become established.

Operating Restrictions—Franchise agreements include many instructions on the ways in which a franchisee must conduct business. These encompass all aspects of a business's operation, from operating hours to accounting procedures to the goods or services that are offered. "These restrictions may impede you from operating your outlet as you deem best," admitted the FTC. "The franchisor also may require you to purchase supplies only from an approved supplier, even if you can buy similar goods elsewhere at a lower cost."

Appearance Many franchisors cultivate a certain readily recognizable look to their outlets, for they know that such standards, when applied consistently, contribute to national recognition of the company name and its products and services. Franchisees generally accept these regulations willingly, for these standards of appearance in the areas of decor, design, and uniforms have proven to be part of a winning formula elsewhere. This is just as well, for the franchise owner who does wish to make changes in his business's appearance often has little freedom to do so.

Association with the Franchisor For the small business owner whose franchise is attached to a highly regarded, financially robust franchisor, the association can be a powerful positive in his or her business. Business experts note, however, that a franchise outlet can suffer severe damage if its franchisor is beset with financial difficulties or public relations problems. "If the franchisor hits hard times, you'll most likely feel them as well," noted the editors of the Small Business Advisor. "You are inevitably tied to the franchisor, not only by contract, but by concept, name, product, and services sold."

Prospective franchisees, then, need to weigh many factors in their decision making about entering the burgeoning world of franchising. But most small business consultants acknowledge that these factors usually boil down to a couple of fundamental concerns. The choice of becoming a franchisee or starting a stand-alone business hinges on the answers one gives to two important questions: Is risk sufficiently mitigated by the trademark value, operating system, economies of scale, and support process of the franchise to justify a sharing of equity with the franchisor? Is my personality and management style compatible with sharing decision-making responsibilities with the franchisor and other franchisees?"

SELECTING A FRANCHISE

It is imperative for prospective franchise owners to make an intelligent, informed decision regarding franchise selection, for once a contract has been signed, the franchisee has committed himself to the enterprise. But the selection process can be a bewildering one for the unprepared entrepreneur. Franchise opportunities are available in a wide array of industries, each of which offers its own potential benefits and drawbacks. Moreover, every franchisor has its own strengths and weaknesses. Several business areas, then, need to be investigated as part of any effective franchise selection process.

Analysis of Self

Experts counsel prospective franchise owners to evaluate their own personal strengths and weaknesses before signing any franchise contract. Prospective franchisees should also have an understanding of their ultimate business and personal objectives before beginning the search for an appropriate franchise. The entrepreneur who is most interested in achieving financial security may want to look in an entirely different industry than the entrepreneur who hopes to land a franchise that will enable him or her to devote more time to family life.

Analysis of Industry and Market

Prospective franchise owners need to evaluate which industries interest them. They also need to determine whether the franchisor's principal goods or services are in demand in the community in which he or she hopes to operate. Other industry-wide factors, such as the cost of raw materials used and the amount of industry competition, need to be weighed as well. The latter issue is a particularly important one, for it can be a fundamental factor in a franchisee's success or failure. The presence of some competition, for instance, often indicates a healthy demand for goods or services in that industry area. A dearth of competitors, though, might indicate that demand is low (or nonexistent). Similarly, the presence of several competitors might necessitate an examination of whether the market can support another provider in that area, or whether you might have to take meaningful market share from already existing businesses in order to survive.

Analysis of Franchisor

Entrepreneurs interested in franchising should be knowledgeable about the strengths and weaknesses of companies that offer such arrangements. Factors that should be considered include the franchisor's profitability, organizational structure, growth patterns, public reputation, litigation history, financial management capabilities, fee requirements, and relationship with other franchisees.

Perhaps the best source of information on these and many other issues is the franchisor's disclosure document. This important document, which must be given to prospective franchise owners at least ten business days before any contract is signed or any deposits are owed, usually takes the form of the Uniform Franchise Offering Circular (UFOC). The UFOC contains important information on key aspects of the franchisor's business and the nature of its dealings with franchisees. Information contained in the UFOC includes a franchise history; audited financial statements and other financial history documents; franchise fee and royalty structures; background on the franchise's leading executives; terms of franchise agreements; estimated start-up costs for franchisees (including equipment, inventory, operating capital, and insurance); circumstances under which the franchisor can terminate its relationship with a franchisee; franchisor training and assistance programs; franchisee advertising costs (if any); data on the success (or lack thereof) of current and former franchisee operations; and litigation history.

Some prospective franchise owners pay less attention to a company's litigation history than other information included in the UFOC, but a company's past litigation experiences can, in some cases, provide important insights into the franchisor's business ethics and/or operating style. "The disclosure document tells you if the franchisor, or any of its executive officers, has been convicted of felonies involving, for example, fraud, any violation of franchise law or unfair or deceptive practices law, or are subject to any state or federal injunctions involving similar misconduct," noted the Federal Trade Commission. "It also will tell you if the franchisor, or any of its executives, has been held liable or settled a civil action involving the franchise relationship. A number of claims against the franchisor may indicate that it has not performed according to its agreements, or, at the very least, that franchisees have been dissatisfied with the franchisor's performance. Be aware that some franchisors may try to conceal an executive's litigation history by removing the individual's name from their disclosure documents."

The inclusion of other information on a franchisor's business dealings with franchisees is up to the discretion of the franchisor. For example, while franchisors are required by law to provide prospective franchisees with documentation of expected start-up costs, they are not required to provide long-term earnings projections. Those who do provide such information are obligated by the FTC's Franchise Rule to have a reasonable basis for the claims they make and provide prospective franchisees with written information substantiating their projections.

It is important, then, to utilize other sources of information in addition to the disclosure document when pondering a move into the world of franchising. For example, small business consultants often urge prospective franchisees to conduct interviews with franchisor representatives about various business issues. Other sources of information often cited include financial institutions (for financial evaluations of the franchisor), state agencies (for information on franchisee rights in the state in which the franchisee is operating), the Better Business Bureau (for news of possible complaints against the franchisor), industry surveys, and associations (such as the Franchise Consultants International Association and the International Franchise Association).

Many experts also encourage prospective small business owners to interview current and former franchisees associated with the franchisor. Would-be franchisees can thus gain first-hand information on a great many business subjects, including: likely size of total investment, hidden or unexpected costs, satisfaction with franchisor performance (in training, advertising, operating, etc.), franchisee backgrounds, and business trends in the industry. Franchisee lists can be a valuable resource, but consultants caution their clients to make certain that they receive a complete list, rather than a list of selected franchisees who are compensated by the franchisor for giving positive appraisals of the company.

FRANCHISING LAWS

The United States has developed an extensive regulatory system designed to govern franchising practices throughout the business world. Chief among the federal guidelines are the FTC's Franchising and Business Opportunity Ventures Trade Regulation Rules and Subsequent Guidelines. In addition, many state governments have fashioned pieces of legislation that directly impact on franchising operations. A good many of the laws governing franchising—both at the state and federal level—are expressly designed to protect prospective small business owners from unscrupulous franchisors who misrepresent themselves.

Franchising experts commonly urge prospective franchisees to enlist the help of an attorney during the franchise selection process. Indeed, since franchising is such a complicated business, many entrepreneurs secure an attorney's services throughout the process. Legal assistance is especially helpful when the time comes to sign the franchise or license agreement, the document that lays out the terms of the partnership between a franchisee and a franchisor. "The franchise agreement is the foundation on which your franchise is built," stated the Entrepreneur Magazine Small Business Advisor. "The agreement gives both parties a clear understanding of the basis on which they are going to continue to operate."

The franchise contract covers all aspects of the franchisee-franchisor agreement, from record keeping to site selection to quality control provisions. The contract is designed to cover both relatively minor issues—such as sign display requirements—to matters of major importance—such as the franchisee's schedule of royalty payments and required insurance provisions. Franchise agreements also include a section devoted to detailing the length of the contract, and any possibilities for extending the terms of the contract beyond the termination date. Long term agreements (15 years or more) give franchisees more security, though this can be problematic if their relations with the franchisor take a bad turn. Since shorter terms do make it easier for franchisors to rid themselves of under performing or troublesome franchisees, some prefer to go this route. Others, however, place a higher value on securing the franchisee royalties that often pour in under the longer agreements.

Information included in the franchise contract includes the following:

• Accounting and recordkeeping provisions
• Existence (and terms) of any performance quotas
• Fairness of the franchise fee
• Fairness of the royalty arrangement
• Franchisor's continuing services to franchisee
• Insurance protection (if any) under franchisor's patent or liability insurance coverage
• Operating provisions (including quality control, human resource management, and other areas)
• Restrictions (if any) on business activities outside the franchise
• Restrictions (if any) on selling the franchise
• Start-up investment required
• Termination or default terms (as well as arbitration clauses)
• Terms of contributions, if any, to parent company's national advertising campaigns
• Terms of inventory and ordering practices
• Terms of renewing the franchise agreement
• Territorial protections

Given the scope of its coverage—and its importance as the binding legal document between franchisee and franchisor—the franchise contract is, in its final form, an imposing and complicated document. Again, the importance of the agreement makes it imperative that prospective franchise owners consult with an attorney before signing the contract.

see also Buying an Existing Business

BIBLIOGRAPHY

Blair, Roger D., and Francine LaFontaine. The Economics of Franchising. Cambridge University Press, June 2005.

Caffey, Andrew A. "Now You're Cooking." Entrepreneur. January 1999.

Federal Trade Commission. Consumer Guide to Buying a Franchise. Available from http://www.ftc.gov/bcp/conline/pubs/invest/buyfran.htm Retrieved on 9 March 2006.

Goldstein, Joel. "Successful Franchisees Investigate before They Invest: Why franchise shows are invaluable to the decision-making process." Franchising World. November 2005.

"Great Business—Why Not Franchise it?" Inc. 29 May 2001.

Harris, Pat Lopes. "Fickle Franchising: Buying a Franchise May Seem Like a Low-Risk Way to Becoming a Successful Entrepreneur, But It's Not Necessarily a Sure Thing." Washington Business Journal. 6 November 1998.

Hill, Terry, and Amy Bannon. "Economic Census will Count Franchise Business." Press Release. International Franchising Association. Available from http://www.franchise.org/article.asp?article=1290&paper=93&cat=303 22 November 2005.

"Many Franchises are Services, Fitness." UPI NewTrack. 5 March 2006.

                                   Hillstrom, Northern Lights

                                    updated by Magee, ECDI

FRANCHISE

A special privilege to do certain things that is conferred by government on an individual or a corporation and which does not belong to citizens generally of common right, e.g., a right granted to offercable televisionservice.

A privilege granted or sold, such as to use a name or to sell products or services. In its simplest terms, a franchise is a license from the owner of atrademarkortrade namepermitting another to sell a product or service under that name or mark. More broadly stated, a franchise has evolved into an elaborate agreement under which the franchisee undertakes to conduct a business or sell a product or service in accordance with methods and procedures prescribed by the franchisor, and the franchisor undertakes to assist the franchisee through advertising, promotion, and other advisory services.

The right of suffrage; the right or privilege of voting in public elections. Such right is guaranteed by the Fifteenth, Nineteenth, and Twenty-fourth Amendments to the U.S. Constitution.

As granted by a professional sports association, franchise is a privilege to field a team in a given geographic area under the auspices of the league that issues it. It is merely an incorporeal right.

Government Franchises

The consideration that is given by a person or corporation in order to receive a franchise from the government can be an agreement to pay money, to bear some burden, or to perform a public duty. The primary objective of all grants of franchises is to benefit the public; the rights or interests of the grantee, the franchisee, are secondary. A corporation is a franchise, and the various powers conferred on it are also franchises, such as the power of an insurance corporation to issue an insurance policy.Various types of business—such as water companies, gas and electric companies, bridge and tunnel authorities, taxi companies, along with all types of corporations—operate under franchises.

The charter of a corporation is also called its general franchise. A franchise tax is a tax imposed by the state on the right and privilege of conducting business as a corporation for the purposes for which it was created and in the conditions that surround it.

Power to Grant The power to grant franchises is vested in the legislative department of the government, subject to limitations imposed by the state constitution. A franchise can be derived indirectly from the state through the agency that has been duly designated for that purpose, such as the local transportation agency that can grant a franchise for bus routes. Franchises are usually conferred on corporations, but natural persons can also acquire them. The grant of a franchise frequently contains express conditions and stipulations that the grantee, or holder, of the franchise must perform.

Not every privilege granted by a governmental authority is a franchise. A franchise differs from a license, which is merely a personal privilege or temporary permission to do something; it can be revoked and can be derived from a source other than the legislature or state agencies. A franchise differs from a lease, which is a contract for the possession and profits of property in exchange for the payment of rent.

Regulation Once a franchise is granted, its exercise is usually subject to regulation by the state or some duly authorized body. In the exercise of police power—which is the authority of the state to legislate to protect the health, safety, welfare, and morals of its citizens—local authorities or the political subdivisions of the state can regulate the grant or exercise of franchises.

Right to Compete While a franchise can be exclusive, exclusiveness is not a necessary element of it. Nonexclusive franchises—including those to function or operate as a public utility—do not include the right to be free of competition. The grant of such a franchise does not prevent the grant of a similar franchise to another entity, or lawful competition on the part of public authorities. The holder of a nonexclusive franchise is entitled to be free from the competition of an entity that does not have a valid franchise to compete. The holder can institute a proceeding for an injunction—a court order that commands or prohibits a certain act—and monetary damages for the unlawful invasion of the franchise.

Duration The legislature can prescribe the duration of a franchise. The powers of local authorities or political subdivisions of the state depend upon the statute that confers the power to make grants and upon any constitutional limitation.

A franchise can be terminated by the mutual agreement of the state that is the franchisor, and the grantee or the franchisee. It can be lost by abandonment, such as when a corporation dissolves because of its fiscal problems. A mere change in the government organization of a political subdivision of a state does not divest franchise rights that have been previously acquired with the consent of local authorities. A franchise cannot be revoked arbitrarily unless that power has been reserved by the legislature or proper agency.

Forfeiture A franchise can be subject to forfeiture due to nonuse. Misuse or failure to provide adequate services under the franchise can also result in its loss. The remedy for nonuse

or misuse lies with the state. Persons other than the state or public authorities cannot challenge the validity of the exercise of a franchise unless they can demonstrate that they have a peculiar interest in the matter distinct from that of the general public.

Invasion of the Franchise A person or corporation holding a valid franchise can obtain an injunction to prevent the unlawful invasion of the franchise rights and can sue for monetary damages if there has been financial loss as a result of the infringement.

Transfer of Franchises Subject to applicable constitutional or statutory limitation, franchises can be sold or transferred. Where the franchises involve public service, they cannot be sold or transferred unless there is authorization by the state. The person or corporation purchasing the franchise in an authorized sale takes it subject to its restrictions.

Private Franchises

Certain written contractual agreements are sometimes loosely referred to as franchises, although they lack the essential elements in that they are not conferred by any sovereignty. The franchise system, or method of operation, has had a phenomenal growth in particular consumer product industries, such as automobile sales, fast foods, and ice cream. The use of a franchise in this manner has enabled individuals with minimal capital to invest to become successful members of the business community.

Under the most common method of operation, the cornerstone of a franchise system must be a trademark or trade name of a product. A franchise is a license from an owner of a trademark or trade name permitting another to sell a product or service under the name or mark. A franchisee agrees to pay a fee to the franchisor in exchange for permission to operate a business or sell a product or service according to the methods and procedures prescribed by the franchisor as well as under the trade name or trademark of the franchisor. The franchisee is usually granted an exclusive territory in which he or she is the only distributor of the particular goods or services in that area. The franchisor is usually obligated by contract to assist the franchisee through advertising, promotion, research and development, quantity purchasing, training and education, and other specialized management resources.

Before 1979 few state legislatures had enacted laws to protect prospective franchisees from being deceived by the falsehoods of dishonest franchisors. These laws, known as franchise disclosure laws, mandated that anyone offering franchises for sale in the state had to disclose material facts—such as the true costs of operating a franchise, any recurring expenses, and substantiated reports of profit earned—that would be instrumental in the making of an informed decision to purchase a franchise.

In states that did not have such legislation, the unsophisticated investor was at the mercy of the franchisor's statements. A victimized franchisee could sue a franchisor for breach of contract, but this was an expensive proposition for someone who typically had invested virtually all of his or her financial resources in an unprofitable franchise. Franchisors confronted with numerous lawsuits often would declare bankruptcy so that the franchisees had little possibility of recouping any of their investments.

The federal trade commission (FTC) received numerous complaints about inequitable and dishonest practices in the sale of such franchises. In late 1978, it issued regulations, effective October 21, 1979, that require franchisors and their representatives to disclose material facts necessary to make an informed decision about the proposed purchase of a franchise and that establish certain practices to be observed in the franchisor-franchisee relationship. These rules are collectively known as the Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures, or more simply, the Franchise Rule.

A franchisor must disclose the background of the company—including the business experience of its high-level executives—for the previous five years; and whether any of its executives, within the last seven years, have been convicted of a felony, have pleaded nolo contendere to fraud, have been held liable in a civil action for fraud, are subject to any currently effective court order or administrative agency ruling concerning the franchise business or fraud, or have been involved in any proceedings for bankruptcy or corporate reorganization for insolvency during the previous seven years.

In addition, there must be a factual description of the franchise as well as an unequivocal statement of the total funds to be paid, such as initial franchise fees, deposits, down payments, prepaid rent on the location, and equipment and inventory purchases. The conditions and time limits to obtain a refund, as well as its amount, must be clear as well as the amount of recurring costs, such as royalties, rents, advertising fees, and sign rental fees. Any restrictions imposed—such as on the amount of goods or services to be sold, the types of customers with which the franchisee can deal—the geographical area, and whether the franchisee is entitled to protection of his or her territory by the franchisor must be discussed. The duration of the franchise, in addition to reasons why the franchise can be terminated or the franchisee's license not renewed when it expires, also must be explained. The number of franchises voluntarily terminated or terminated by the franchisor must be reported. The franchisor must disclose the number of franchises that were operating at the end of the previous year, as well as the number of company-owned outlets. The franchisee must also be supplied with the names, addresses, and telephone numbers of the franchisees of the ten outlets nearest the prospective franchisee's location, so that the prospective franchisee can contact them to obtain a realistic perspective of the daily operations of a franchise.

If the franchisor makes any claims about the actual or projected sales of its franchises or their actual or potential profits, facts must be presented to substantiate such statements.

All of these facts—embodied in an accurately, clearly, and concisely written document—must be given to the prospective franchisee at the first personal meeting or at least ten days before any contractual relationship is entered or deposit made, whichever date is first. The purpose of this disclosure statement is to provide the potential investor with a realistic view of the business venture upon which he or she is about to embark. Failure to comply with the FTC regulation could result in a fine of up to $10,000 a day for each violation.

Some states have also enacted laws that prohibit a franchisor from terminating a franchise without good cause, which usually means that the franchisee has breached the contract. In such a case, the franchisor is entitled to reacquire the outlet—usually by repurchasing the franchisee's assets, such as inventory and equipment.

In states without "good cause" laws, franchisees claim that they are being victimized by franchisors who want to reclaim outlets that have proven to be highly profitable. They allege that the franchisor imposes impossible or ridiculous demands that cannot be met to harass the franchisee into selling the store back to the franchisor at a fraction of its value. Company-owned outlets yield a greater profit to the franchisor than the royalty payments received from the franchisee. Other franchisees claim that their licenses have been revoked or not renewed upon expiration because they complained to various state and federal agencies of the ways in which the franchisors operate. Such controversies usually are resolved in the courtroom.

further readings

Andrews, Chris. 2003."Granholm Pushing for Financial Disclosure Law." Lansing State Journal (June 18).

Siatis, Perry C. 2000. "Assessing the FTC's Proposed Franchise Rule Provisions Involving Electronic Disclosure." Brigham Young University Law Review (May 20).

Vegetarian Burger

A vegetarian burger is a meatless patty made of ground grains or soybean curd, and vegetables. It is often referred to as a veggieburger.

Background

Americans' love affair with hamburgers began sometime in the 1850s when German immigrants introduced the Hamburg steak to their new country. Made with a mixture of ground beef and seasonings and served on a roll, it quickly became the quintessential American meal. In fact, hamburgers were the foundation for the proliferation of fast-food chain restaurants in the United States and eventually around the world. A fat content of 15-30% supplies the juicy taste that consumers love, but has also been linked to health problems. This, and the rise in popularity of a vegetarian diet, led food processors to develop a meatless burger.

Although the term vegetarian did not exist until the 1800s, the theory or practice of following a meatless diet can be traced as far back as the first millennium. The Buddhist religion forbade the killing of animals for food. Buddhist priests who had spent time in China were responsible for introducing tofu, a white cheeselike substance that results from the soaking or boiling of soybeans, to Japan in the eighth century. The sixth century b.c. Greek philosopher and mathematician Pythagoras advocated a kinship between humans and animals, and his followers often adhered to a vegetarian diet. Plato, Epicurus, and Plutarch were other early vegetarians.

In the Christian religion, the avoidance of meat has often been viewed as a penance. Some monastic orders forbid the consumption of meat. For centuries, Catholics were instructed to forgo meat on Fridays and even now avoid it during the season of Lent. In the 1800s, the Bible Christians sect was created when a group separated from the Church of England, citing the Bible's prohibition of meat consumption as one reason for the split. William Metcalf, a Bible Christian minister, and 41 followers, arrived in the United States in 1817. One of those followers was Sylvester Graham who traveled the country extolling the virtues of vegetarianism. One of his particular favorite foodstuffs was whole grain flour, and it is from him that we got Graham crackers.

By 1847, British Bible Christians had established the Vegetarian Society of Great Britain. The American Vegetarian Society followed in 1850. Up until this time, the primary impetus for following a vegetarian diet was a concern for animal life. In the twentieth century, the healthful benefits of a meatless diet became another, equally compelling force. Once again, this came from within the religious community: the Church of Seventh Day Adventists, which claims that 50% of its members and nearly 100% of its clergy are practicing vegetarians.

One of its most famous members was John Harvey Kellogg of corn flake fame. Kellogg was physician-in-chief of the Adventist-run Western Health Reform Institute in Battle Creek, Michigan. Kellogg believed that meat consumption was ruinous to the human colon and thus the Institute's kitchen was strictly vegetarian. Kellogg and his wife developed the first meat substitute, a seasoned peanut and flour mixture called nuttose. Worthington Foods, the country's oldest vegetarian foods company, was established in 1939. Its initial target market was members of the Church of Seventh Day Adventists. Today, the company produces a veggieburger under its Morningstar Farms brand.

By the 1960s, vegetarian restaurants were cropping up throughout the United States. In 1971, Diet for a Small Planet, by Frances Moore Lappe was published. Although Lappe's purpose was to alert the public to the negative effects of animal farming on the environment and people rather than to write a treatise on vegetarianism, her book convinced many to drop meat from their diet. Equally influential was the burgeoning animal rights movement, buoyed by the publication in 1975 of Animal Liberation by Peter Singer, and the founding of People for the Ethical Treatment of Animals (PETA) in 1980.

By the close of the twentieth century, vegetarianism was enjoying its strongest popularity, with an estimated 15 million practitioners in the United States alone. An entire industry devoted to the processing of high-protein vegetable foods to simulate the taste of meat has evolved.

One successful meatless burger company is Gardenburger, Inc., founded by Paul Wenner. Wenner became interested in the correlation between nutrition and health in the 1960s. Chronically ill most of his life, Wenner experimented with various food combinations and ultimately became a vegetarian. After working as a cooking teacher for a number of years, he opened the Gardenhouse restaurant and Gourmet Cooking School in Gresham, Oregon. It was here that the original Gardenburger, a mixture of mushrooms, brown rice, onions, oats, and low fat cheeses, was created. In 1985, he was forced to close the restaurant. Undaunted, he established Wholesome and Hearth Foods, Inc., and began to distribute his meatless burger nationwide.

Other major brands include Boca Burger and Harvest Burger. Although some of the smaller firms produce their veggieburgers by hand, most companies employ modern food-processing machinery.

Raw Materials

Veggieburgers are created with a variety of ingredients including, but not limited to soybeans, rice, whole wheat, black beans, corn, lentils, mushrooms, carrots, and zucchini. Some companies add stabilizers such as tapioca starch and vegetable gum. These ingredients are purchased from outside suppliers and then processed in-house. When the grains and vegetables arrive at the plant, they are examined for quality. Rotted specimens are discarded.

The Manufacturing
Process

Washing

• 1 Grains and vegetables are loaded into separate machines for thorough cleansing to remove dirt, bacteria created by spoilage, chemical residue, and any other foreign materials that may exist. Some factories have conveyer belts that move the food products under high-pressure sprayers. Others use hollow drums that tumble the food while water is sprayed on it.

Cooking the grains

• 2 The base grain, whether it be whole wheat, rice, or beans, is cooked in large vats of water until softened. The resulting puree is strained, separating the product from excess water, and any remaining foreign matter.

Dicing the vegetables

• 3 The vegetables are diced into tiny pieces. In some factories, this is done by a machine that is calibrated to slice the vegetables into uniform sizes. Other, smaller companies, still do this by hand.

Combining the grains and
vegetables

• 4 Pre-measured amounts of the grain puree and the diced vegetables are combined into an industrial mixing bowl that blends the ingredients thoroughly.

Forming the patties

• 5 The mixture is then loaded into an automatic patty-making machine, or press. The press is a cylindrical device with several stacks of round molds topped by a plunger. When the plunger is depressed, the ground mixture is formed into patties.

Baking the patties

• 6 The patties are loaded onto perforated baking trays, then placed in an oven for about an hour and a half at a preset temperature.

Patties are quick-frozen

• 7 The trays are loaded into a freezing chamber in which the temperature is below the freezing point of 32° F (0° C). The goal is to freeze the patties in 30 minutes or less. Because vegetables contain a jelly-like protoplasm, the speedy processes promotes the formation of ice crystals through the tissues. When the patties are cooked, the water is reabsorbed as the ice crystals melt.

Patties are vacuum-packed and
packaged

• 8 The patties are conveyed to a vacuum-packing machine which envelopes the patties in pre-measured plastic sleeves, drawing out the excess air and sealing each end. Then, they are loaded into pre-printed cardboard packages, usually four patties to a package. The frozen varieties are kept in temperature-controlled refrigerated compartments before and during shipment.

Quality Control

The Food and Drug Administration issues strict standards for the commercial processing of food. These regulations include sterilization of factory equipment, quality of ingredients, and storage safeguards. Raw materials are tasted and judged visually upon their arrival at the plant. Tasters also sample the product at various points along the processing line.

The Future

While the trend toward a more healthful diet is expected to continue, it is not readily apparent that the veggieburger will become an integral part of that diet. The primary challenge facing companies that produce meatless burgers is to create a patty that pleases palates accustomed to beef and the fat that gives it its flavor.

On the positive side, the products received major media coverage toward the end of the 1990s. Boca Burgers were served at the White House and in the Senate. Gardenburger's consumer market share jumped from 24-51% after it purchased advertising time on "Seinfeld," a popular television program. However, most industry analysts think that the real breakthrough will only occur if one of the major hamburger chains, such as Burger King or McDonald's, puts a veggieburger on the menu.

Where to Learn More

Books

Messina, Virginia and Mark Messina. The Vegetarian Way. New York: Harmony Books, 1996.

Wenner, Paul. GardenCuisine: Heal Yourself. New York: Simon & Schuster, 1997.

Periodicals

"Veggieburgers Are Ringing Up Meaty Sales." Chicago Tribune, 6 December 1998, sec. 5, p. 1.

Other

Boca Burger. http://www.bocaburger.com (March 4, 1999).

Gardenburger, Inc. 1997. http://www.gardenburger.com (March 4, 1999).

Worthington Foods. http://www.momingstarfarms.com (March 4,1999).

—MaryMcNulty

franchise. Prior to 1832 the qualifications for voting in parliamentary elections were complex and widely varied, reflecting the gradual and unplanned evolution of law and practice. In the 32 counties, each of which sent two MPs to parliament, an act of 1542 gave the vote to 40‐shilling freeholders. The two MPs for Trinity College, Dublin, were elected by the 22 fellows and 70 scholars. The 117 boroughs that returned the remaining 234 Irish MPs fell into five categories. In 57 corporation boroughs the voters were the members of the corporation, generally 13 in number. In 34 freeman boroughs corporation members were joined by those who had been granted the freedom of the borough. In 12 boroughs ‘potwallopers’, householders controlling their own front door and cooking facilities, had the right to vote. In 6 manor boroughs the 40‐shilling freeholders voted. Finally there were 8 country boroughs, all substantial urban centres, in which the vote was given to members of the corporation, freemen, and 40‐shilling free‐holders.

One hundred and seven boroughs were ‘close’, in the sense that a single patron controlled the outcome of the election. In corporation and freeman boroughs this happened because a patron had ensured that the unelected corporation was run by his dependants and that the freedom of the borough, where this carried voting rights, was granted sparingly and only to reliable persons. In manor and potwalloping boroughs, proprietorial control arose from the social and economic influence of a single landlord over all or the majority of voters. The open constituencies were the country boroughs (Dublin, Cork, Galway, Drogheda, Waterford, Kilkenny, Carrickfergus, and Limerick), along with Derry and Swords, Co. Dublin, each of which had an electorate too large for any one patron to dominate. There, as in the countries, there was scope for a genuine contest between rival interests, although the individual voter might be just as much under the control of a social superior as in a close borough.

The Act of Union, reducing the Irish constituencies to the 32 countries, Trinity College, and the large boroughs, sharply increased the proportion of open to close constituencies. The granting of Catholic emancipation in 1829 was balanced by legislation to raise the country franchise to £10, disenfranchising the 40‐shilling freeholders whom O'Connell had so effectively mobilized. This reduced the country electorate from 216,000 to 37,000. The first major Parliamentary Reform Act, in 1832, retained the £10 franchise in the counties, but admitted some categories of leaseholder. The multiplicity of borough franchises was replaced by a single qualification of occupation of property valued at £10 or more per annum. This brought the county electorate back to around 60,000, and the borough electorate to 30,000. However, the complexities of the registration system, and the use of leasehold as the basic qualification for voting in the countries, produced an arbitrary and unpredictable system. One Irish urban dweller in 26, and one country dweller in 116, had the vote, compared to one in 17 and one in 24 in England. After 1832, moreover, the Irish electorate declined, reflecting both the unwillingness of land‐lords to grant leases and, later, the ravages of the Great Famine.

The Irish Franchise Act of 1850 was the single most important reform measure of the 19th century. The borough franchise was reduced to £8. The country franchise was set at £12, but this was now linked to occupation rather than ownership or leasehold. The registration system was thoroughly restructured. The result was to increase the Irish electorate from 45,000 to 164,000, admitted on a reasonably coherent and consistent basis. The Reform Act of 1868, affecting only the boroughs, reduced the franchise to ‘over £4’, and admitted lodgers occupying premises valued at £10 or more per year. By 1871 16 per cent of the adult male population could vote, compared to 34 per cent in England. The Representation of the People Act (1884) created a uniform franchise of £10 or more for the whole of the United Kingdom. The result was to admit the majority of heads of households among labourers and small farmers, while continuing to exclude lodgers, servants, and adult men living with parents. Meanwhile a Redistribution of Seats Act (1885) abolished all but nine boroughs, replacing them with new constituencies created by dividing the counties and the boroughs of Belfast and Dublin. The electorate rose from 226,000 to 738,000.

The last major extension of the franchise was in 1918, when men over 21 and women over 30 gained the vote. The electorate rose from 700,000 in 1910 to just under 2 million. Women aged between 21 and 29 were enfranchised in the Irish Free State in 1923. In Northern Ireland, as else‐where in the United Kingdom, they had to wait until 1928.

Bibliography

Hoppen, K. T. , Elections, Politics and Society in Ireland 1832–1885 (1984)
Johnston, E. M. , Great Britain and Ireland 1760–1800: A Study in Political Administration (1963)

Franchise

BIBLIOGRAPHY

The franchise, or the privilege or right to vote to elect public representatives or enact legislation, originated with the ancient Greek city-states of the fifth century BCE. As a political right, the franchise constitutes one of the core elements in modern citizenship, along with other political, civil, and social rights. In modern times the extension of franchise across European and North American nation-states marked the passage from a paternalistic form of government in the eighteenth century to the acceptance of the concept of citizenship, which is the foundation of democracy.

There has been wide variation across countries in the timing and regulation of the franchise. In most countries the franchise was extended gradually, as occurred in Great Britain, France, and the United States. In Finland, by contrast, it was extended all at once in the reform of 1906. The franchise may also be exercised at only certain levels of representation. In 1896, for example, women in Idaho were permitted to vote in school elections but not in state or federal elections, while women in Brazil were enfranchised in 1927 in the state of Rio Grande do Norte but not at the federal level. Since 2004 noncitizens in Belgium may vote in local elections only.

Where the franchise was extended gradually, voters entered the electorate in social groups. For instance, in Norway the franchise was extended to property holders in 1814, to manual workers and others in 1900, and to women in two stages in 1907 and 1913. Retractions of the franchise have also taken place. In France, for example, the franchise was granted to a large number of citizens in the late 1700s but was then severely contracted in 1815. Various qualifications have been used to regulate the franchise, including church membership, religious denomination, property ownership, taxpaying, literacy, a poll tax, residency, gender, and age. All such requirements have been aimed at disenfranchising different social groups at different times.

Franchise rules come about as a result of political conflict or as a by-product of conflicts over other issues. As E. E. Schattschneider points out in The Semisovereign People (1960), political conflicts that may produce franchise changes include political party competition, that is, from a conflict among governing elites for electoral advantage. In such cases extending the franchise to certain social groups may decide the outcome of elections to the advantage of the party or parties that appeal to the new voters. Franchise extensions may also be the product of conflict between governing elites and groups excluded from the electoral process, such as women or workers and their organizational representatives. Pressure from excluded groups may lead to franchise extensions by governing elites in an attempt to maintain the legitimacy of their governance (Freeman and Snidal 1982), especially when economic conditions or foreign policy objectives threaten the stability of the current political regime.

Conflicts over other issues, including economic conflict, may produce franchise changes as a by-product. For instance, international trade in nineteenth-century Europe and the United States, particularly the conflict between protectionists and free traders, is cited by Dietrich Rueschemeyer, Evelyne Huber Stephens, and John D. Stephens, the authors of Capitalist Development and Democracy (1992), as underlying the coalitions supporting or opposing franchise extensions. Opponents in the conflict devised franchise rules to change the balance of power in legislatures. Since about the mid-1900s democratic expectations have rendered the franchise a political right basic to democratic citizenship, so universal franchise with an age requirement has been generally granted automatically.

SEE ALSO Citizenship; Democracy; Democracy, Representative and Participatory; Elections; Elite Theory; Free Trade; Protectionism; Schattschneider, E. E.; Suffrage, Women’s; Voting; Voting Patterns

BIBLIOGRAPHY

Freeman, John, and Duncan Snidal. 1982. Diffusion, Development and Democratization: Enfranchisement in Western Europe. Canadian Journal of Political Science 15 (2): 299–329.

Marshall, T. H., and Tom Bottomore. 1950. Citizenship and Social Class, and Other Essays. Cambridge, U.K.: Cambridge University Press.

Porter, Kirk H. 1918. A History of Suffrage in the United Stat es. Chicago: University of Chicago Press.

Rueschemeyer, Dietrich, Evelyne Huber Stephens, and John D. Stephens. 1992. Capitalist Development and Democracy. Chicago: University of Chicago Press.

Schattschneider, E. E. 1960. The Semisovereign People: A Realist’s View of Democracy in America. New York: Holt, Rinehart, and Winston.

Barbara Sgouraki Kinsey

FRANCHISING

Post-World War II Boom

Franchising initially became popular in the 1920s, especially with automobile manufacturers, oil companies, and restaurants setting up outlets, but the major franchise boom took place after World War II. In the mid to late 1940s thousands of veterans returned home to the United States with the notion of being their own boss. Although big business dominated major sectors of the economy, the tradition of small-business ownership remained very strong. Franchising, in effect, combined the benefits of both large and small business. Under the terms of an agreement the franchisee was a legally independent business (most often a small business) separate from the franchising company. The contract generally specified that the individual acquiring the franchise pay an initial fee, sell only specific products, conduct business in a certain manner, and often cede the franchiser a certain percentage of gross sales. For the small-business owner there were several advantages: a smaller initial investment was needed; training and advertising were provided by the parent company; and usually one was selling a product with a national, or at least regional, reputation. The strong desire to be an independent businessperson, combined with large companies' desires to distribute their products as cheaply as possible, led to a rapid expansion of franchises. By 1967 sales from franchise outlets accounted for 10 percent of the GNP.

McDonaldization of America

The franchising explosion was led by Ray Kroc and his McDonald's chain. By the late 1950s Kroc had hit upon a formula for success. His restaurants featured spotless kitchens, an assembly-line process for making standardized food—hamburgers, french fries, and soft drinks—consistent quality, speedy service, and low prices. Training for franchise owners was provided at what was called Hamburger University, and franchisees were held to strict requirements regarding food quality, store appearance, and cleanliness. By 1980 there were over sixty-five hundred McDonald's outlets with sales over $6.2 billion. So successful was McDonald's that its system became the model for other fast-food franchisers (Domino's Pizza, for example) to follow.

Beyond Fast Food

By the 1960s franchising had moved well beyond fast food. Franchise operations now provided people with a wide variety of services ranging from renting moving equipment (U-Haul outlets), preparing taxes (H & R Block), or repairing cars (Midas Muffler shops). One franchise that took off in the 1960s rode the electronics boom to success. By middecade the electronics business had become the nation's fifth largest industry, turning out such products as televisions, radios, stereos, appliances, and high-technology equipment for the Defense Department. Charles Tandy, a Fort Worth, Texas, businessman, believed there was a huge market for electronics, and in 1963 he purchased the nine existing Radio Shack stores. He then began to sell franchises nationally. Placing the outlets in suburban malls as well as small towns and cities, Tandy provided electronic goods with a high turnover and high profit margins. Growth was rapid, and by 1980 there were seventy-five hundred Radio Shack stores, outnumbering the ubiquitous McDonald's restaurants.

Sources:

Mansel G. Blackford, A History of S?nall Business in America (New York: Twayne, 1991);

Thomas S. Dicke, Franchising in America (Chapel Hill & London: University of North Carolina Press, 1992);

Ray Kroc, Grindinglt Out: The Making of McDonald's (Chicago: Regnery, 1977).

franchise in government, a right specifically conferred on a group or individual by a government, especially the privilege conferred by a municipality on a corporation of operating public utilities, such as electricity, telephone, and bus services. Franchises may not be revoked without the consent of the grantee unless so stipulated in the contract. They may, however, be forfeited by the grantee's violation of terms, and the government may take back granted rights by eminent domain proceedings with tender of just compensation. Franchise provisions usually include tenure; compensation to the grantor; the services, rates, and extensions; labor and strike regulations; capitalization; and reversion to the grantor.

The term franchise also refers to a type of business in which a group or individual receives a license from a corporation to conduct a commercial enterprise. Corporate franchises enable a franchisee to market a well-known product or service in return for an initial fee and a percentage of gross receipts. The franchiser usually provides assistance with merchandising and advertising. Major franchise networks, which have grown rapidly in the United States since the 1960s, include fast-food restaurants, gasoline stations, motels, automobile dealerships, and real-estate agencies, and the system has expanded into many other fields.

In politics, the franchise is the right conferred on an individual to vote. In the United States, the states, with some restrictions by the U.S. Constitution, govern the qualifications of voters. By the Fourteenth and Fifteenth amendments, states were forbidden to deny suffrage to male residents over 21 years of age "on account of race, color, or previous condition of servitude." The Nineteenth Amendment conferred suffrage upon women, and the Twenty-sixth Amendment lowered the voting age to 18. See voting .

Bibliography: See C. Williamson, American Suffrage from Property to Democracy, 1760–1860 (1960, repr. 1968); C. L. Vaughn, Franchising (1974).

franchise Right or privilege of an individual to vote in public political elections, granted by government. Franchise is conferred according to a set of criteria which may include age, sex, race or class. In modern democracies, the intention is that anyone over a specific age has the right to vote. In Britain, the modern basis of the franchise dates from the 1832 Reform Act and later acts, which, by 1918, ensured all men over the age of 21 and women over 30 were entitled to vote (the first country to give women the vote was New Zealand, 1893). By 1928, women over 21 were enfranchised and in 1969 the voting age in Britain was lowered to 18. In the USA, the franchise is granted by each state, and this is overseen by the Constitution. The 14th and 15th Amendments (1868 and 1870) forbid any state to deny voting rights to resident adult men aged over 21 on the grounds of race, colour, or previous servitude. The 19th Amendment (1920) gave women the vote. In practice, voting rights were restricted in the USA until the 1960s. In particular, grandfather clauses were added to the constitutions of seven Southern States to deprive African-Americans of their voting rights. Other methods of restricting the franchise included literacy tests and poll taxes. The 24th Amendment (1964) banned poll taxes. The Voting Rights Act (1965) outlawed literacy tests and installed poll observers to prevent voter intimidation. The 26th Amendment (1971) lowered the voting age to 18.

FRANCHISE

A franchise is the business resulting when permission or authorization is given to someone to sell or distribute a company's products in a given location. Sometimes the geographic territory itself is called a franchise. A franchisee is a person who operates under such authorization.

Franchises are extremely common in the economy of the latter-half of the twentieth century. Most fast-food restaurants, retail shops, and other common businesses operate as franchises. Typically, the parent company that authorizes the franchise also develops the concept, designs the store, markets the product nationally, and trains the local franchisee, all in exchange for a fee and perhaps a percentage of profits. The parent company may also insist that certain standards of product quality be met, and that employee uniforms and the like be similar to those in the company's other franchises. In the largest such companies, a single parent corporation operates through thousands of franchise outlets.

Critics complain that franchises lead to a loss of distinctive regional identities because all businesses tend to look the same all over the country. Defenders, however, contend that society benefits because a parent company can demand a level of quality higher than might be found in most small, local operations.

fran·chise / ˈfranˌchīz/ • n. 1. an authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities, e.g., providing a broadcasting service or acting as an agent for a company's products. ∎  a business or service given such authorization to operate. ∎  an authorization given by a league to own a sports team. ∎  inf. a professional sports team. ∎  (also franchise player) inf. a star player in a team. 2. (usu. the franchise) the right to vote. ∎  the rights of citizenship. • v. [tr.] grant a franchise to (an individual or group). ∎  grant a franchise for the sale of (goods) or the operation of (a service): all the catering was franchised out. DERIVATIVES: fran·chi·see / ˌfranˌchīˈzē/ n. fran·chis·er (also fran·chi·sor / ˌfranchəˈzôr/ ) n.

franchise †freedom XIII; legal immunity or privilege XIV; (hist.) district over which a privilege extends XV; right of voting at a public election XVIII. — (O)F., f. franc, fem. franche free, FRANK + -ise, repr. L. -itia -ESS2.

FRANCHISE

FRANCHISE. SeeSuffrage .

franchise. See suffrage.

franchise See suffrage.

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