Test a dealer or distribution contract against the franchise definition
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Mark whether the paper mentions a trademark, control or assistance in the method of operation, and a required payment, with the clause. Do not call the contract a franchise.
- What the lawyer must review
- 16 C.F.R. § 436.1(h) defines a franchise as a continuing commercial relationship in which the offer or contract, or the franchise seller's promise or representation, provides that the franchisee will obtain the right to operate a business or to offer, sell or distribute goods, services or commodities identified or associated with the franchisor's trademark; the franchisor will exert or has authority to exert a significant degree of control over the franchisee's method of operation, or will provide significant assistance in that method; and, as a condition of obtaining or commencing the franchise, the franchisee makes or commits to make a required payment to the franchisor or its affiliate. Section 436.1(s) says a required payment does not include payments for reasonable amounts of inventory at bona fide wholesale prices for resale or lease. All three elements are for you to judge. A contract that is not a franchise is outside Part 436.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Do not begin AI assistance until the responsible lawyer has defined and confirmed its permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Open each relied-on authority independently. Confirm its existence, current status, proposition and any quotation or pinpoint reference.
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.
Related tasks
Draft or review a franchise disclosure document against the prescribed headingsCheck the franchisor's disclosure and any registration the jurisdiction requiresDraft or review a franchise agreement from the disclosure and the term sheetBuild a franchisee due-diligence issues list from the disclosure pack