US constitution

In Brief:

      • The constitution was ratified on June 21, 1788.
      • The framers organized the constitution into the Preamble, the Articles, and the Amendments.
      • American franchise law operates under a similar framework of laws and regulations.
      • The FTC Franchise Rule, franchise relationship rules, and business opportunity rules all place precedence on fair dealings for franchisors and franchisees alike.

On June 21, 1789, the Constitution of the United States became the supreme law of what would become the most powerful country on Earth. From its inception, this one piece of legislation has led to strong debate over the rights of Americans.

Over 200 years ago, the framers of the Constitution laid out the foundation of democracy as a counter-measure over the hardships they experienced under British rule. As American citizens, we may have all been forced to study the Constitution seemingly every year of our schooling lives, but let’s take a deep-dive into what the Constitution entails as the most important legal document in the land.

The Constitution Broken Down

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The Constitution is organized into three parts. The first part, the Preamble, describes the purpose of the document and the Federal Government. The second part, the seven Articles, establishes how the Government is structured and how the Constitution can be changed.

The third part, the Amendments, list changes to the Constitution; the first 10 are called the Bill of Rights. The Founding Fathers believed the new government should be based on three principles:

  • There are certain unalienable rights that all people share.
  • The separation of government into three branches.
  • The right of the people to self-govern.

These three principles fell in line with the zeitgeist spreading through Europe and its colonies around the 17th and 18th centuries that led to several revolutions including in the United States, France, and Haiti.

With the help of our friends John Locke and Baron de Montesquieu, the commoners of the world realized they need not pay umbrage to some pompous figure head while the average person struggled for daily food rations and a place to sleep.

How Franchise Law Relates

The American franchise system faces a similar framework of regulatory practices that you can find in the constitution. When it comes to franchising, these rules and regulations have helped the industry flourish into an economic force.

According to the legal site Lexology, in 2016 there were over 7.6 million employees working at over 730,000 franchise outlets. They accounted for roughly $674 billion in output. So what are these rules and regulations?

FTC Franchise Rule

In 14 states this law requires that any franchisor operating in the U.S. must prepare a franchise disclosure document, as stipulated by the FTC Franchise Rule, for prospective franshisees. You can find out more about FDDs here.

Franchise Relationship Laws

In 25 states, this cluster of laws requires that a franchisor have probable cause to terminate a franchise and that the franchisor must give a time period for the franchisee to rectify the issues that led up to the threat of termination.

Two people shaking hands

Business Opportunity Laws

Some businesses may technically not fall under the franchise category. In a situation where an arrangement is made between the seller and buyer where the seller makes certain implications or claims, the buyer is still entitled to a disclosure form. This is known as the FTC Business Opportunity Rule.

Business people shake hands

In Short

The Constitution is a vague piece of legislation from a more antiquated time in human history, yet its defense of life, liberty, and the pursuit of happiness has always remained resolute. The ability to pursue your franchising dreams and live the life you were meant to live is an American ideal we can all be proud of.

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