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What the federal rule examines
The Federal Trade Commission’s Franchise Rule examines a continuing commercial relationship with three elements: association with a trademark or other commercial symbol; significant control over, or assistance with, the operator’s method of doing business; and a required payment or commitment.
A licence grants permission to use specified rights. If you also supply the operating system, the arrangement may raise franchise duties. Calling the operator an investor, distributor or licensee does not change the actual rights, support and payments.
Why separate purchases can form one system
In a fictional maintenance offer, the operator receives branded vans, mandatory scheduling software, initial training and required inspection methods, and pays a licence fee. These features work together to shape how the service is run.
The important questions are what the training teaches, what the software controls, how much discretion the operator retains and which payments are unavoidable. Software alone does not decide the test. Three separate invoices for the licence, training and software do not remove the need to consider the complete arrangement.
An exemption is a separate question
Once the arrangement is described accurately, examine any federal exclusion or exemption and its conditions. An exemption from specified duties does not necessarily change the relationship’s definition. Include promises made in presentations and ordinary practice, not just the signed contract, and payments to related companies.
State definitions and sales requirements are independent. A federal conclusion does not settle the states connected with the seller, buyer, offer or proposed outlet.
Scope
- This is the federal starting point; it does not classify your arrangement or establish an exemption. State and local requirements remain separate.
Next step
Before offering the arrangement, compare the contract, actual support promises and all required payments as one business model.
Sources & review notes
Federal Trade Commission
Passage, dates and research notes
primary · section-436.1
whatever it may be called
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Federal Trade Commission
Passage, dates and research notes
primary · section-436.8
less than $735
Current eCFR displayed through 2026-11-09; eCFR is authoritative but not the official legal edition.
Federal Trade Commission
Passage, dates and research notes
official-guidance · pp. 2–4, 16, 113–115
overall method of operation
Published May 2008 (day not asserted). Read relevant full-PDF sections. Dated guidance contains obsolete monetary thresholds and dated accounting discussion: current CFR controls; auditor must verify current SEC-permitted treatment.
Detailed rule records (1)
A continuing commercial relationship can meet the federal definition where it involves trademark association, significant control or assistance over the method of operation, and a required payment or commitment. Apply exemptions separately.
16 CFR §436.1: Federal franchise definitionRelated case records
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