Recently the Wall Street Journal published an interesting article pondering the next frontier for franchising. In the article, the WSJ coined the term "quasi-franchising," a method of franchising that allows franchisees to add their personal touches by taking control of the front of the house while leaving behind the scenes control to the franchisor. For example, a quasi-coffee cafe franchise might operate using the franchisor's signature coffee, coffee making methods, workplace standards, training and operations manuals but decorate the location in its own distinct and unique way. According to the article, quasi-franchising may be appealing to Generation X and Y who "have become weary of the [commoditization] of so many aspects of consumer life." Quasi-franchising is not without its limitations and is likely to work best in niche industries such as hotels and restaurants where customers appreciate personal touches and exceptional service.
The concept is an interesting one and the prospect raises some unique legal questions. Under the business relationship proposed by the author "quasi-franchises" may not even operate under a common trademark. As most franchise practitioners know, the licensing of a trademark is a key component of franchising. If franchisees do not license a franchise system's marks, then they do not legally meet the definition of a "franchise" under FTC Rule and wouldn't be governed by the same disclosure obligations as typical franchisees. But then is this relationship no more than simple outsourcing? The author of the article is quick to answer NO. With quasi-franchising the franchisee "isn't just buying discrete services, but rather an entire way of doing things." It is hard to know how many franchisors would be interested in relinquishing certain creative control to reach more independent entrepreneur types. However, the ability to tap into the Generation X and Y market and avoid the more onerous requirement under the FTC Rule and certain state disclosure and registration laws may certainly be appealing to some systems. To read the full article click here.
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