Franchising : Friction between transnational business models and national legislation

Business models are created by business people in order to achieve a purpose. If a business model is successful, it will be widely used and might become transnational, i.e., not limited by national borders. However, most legislation is limited by national borders. This dissertation analyzes and describes how national legislation affects transnational business models. For purposes of clarity, the transnational business model of franchising has been used as a continuous, concrete example and object for examination. This dissertation describes, analyzes, compares and systematizes the business model franchising and its role in the legal system. The study describes the evolution of the business model from the 1850s to the present date. An important question is whether the phenomenon is the same all over the world, i.e., whether it is defined in the same way and bound by the same rules and norms. To find out, a full-range study was conducted of the national legislation directly aimed at franchising in the 36 countries that have introduced such legislation. To widen the focus, definitions and norms from different organizations and projects involved in franchising were also included in the analysis. Through use of a reduction model, a standard definition, like a lowest common denominator, was extracted. As only 18 percent of the world’s countries have introduced special legislation on franchising, a sub-study was conducted to analyze if franchise law should be considered a legal field unto its own and hence if it would be viable to legislate specifically about franchising. The study showed that franchising affects and is affected by so many fields of law that it would not be correct to speak about franchise law. Another study covered the 36 countries with specific franchise laws, to analyze the extent of equivalency between these laws, only to show a great variation in the rules. All rules that deviated from the standard definition of franchising were seen as friction rules. The frictions resulting from such rules were described and analyzed. An alternative to specific legislation could be global harmonization through international conventions, model laws or self-regulation. Various actions already taken in these directions were described, compared and analyzed. Another alternative would be not to legislate and instead rely on general legal principles. This was described and analyzed in the dissertation in the light of legislative studies, with both Grant Thornton’s “five stages of drafting” and Lon Fuller’s “desiderata” used to test this option