---
title: "Test a dealer or distribution contract against the franchise definition"
url: "https://ailawframework.com/practice/franchising-and-distribution/draft-or-review-a-distribution-dealer-or-agency-agreement/united-states"
type: "task_jurisdiction_version"
site: "AI Law Framework"
id: "A34-T1-R11-US"
practice_area: "Franchising & Distribution"
tier: "yellow"
lawyer_review: "required"
jurisdictions: ["US"]
last_reviewed: "2026-10-22"
---

# Test a dealer or distribution contract against the franchise definition

> 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.

Canonical page: https://ailawframework.com/practice/franchising-and-distribution/draft-or-review-a-distribution-dealer-or-agency-agreement/united-states  
Last reviewed: 2026-10-22

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

| Fact | Value |
| --- | --- |
| Practice area | [Franchising & Distribution](https://ailawframework.com/practice/franchising-and-distribution.md) |
| Human involvement | Yellow: Lawyer and AI draft together |
| 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 | United States |
| Applies to | [Draft or review a distribution, dealer or agency agreement](https://ailawframework.com/practice/franchising-and-distribution/draft-or-review-a-distribution-dealer-or-agency-agreement.md) |

## Checking plan

- What the AI does: 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.
- Basis: Checked against the linked sources on 22 October 2026. Confirm the current instrument before reliance.

## Notes

- State dealer statutes were not opened. A contract can be regulated by a state even if it is not a franchise under § 436.1(h).
- Exemptions in subpart E were not opened.

## Sources

- [16 C.F.R. Part 436, Franchise Rule](https://www.ecfr.gov/current/title-16/chapter-I/subchapter-D/part-436) (checked 2026-10-22)
- [FTC Franchise Rule page](https://www.ftc.gov/legal-library/browse/rules/franchise-rule) (checked 2026-10-22)

## Forms and precedents for this task

| Form or precedent | Kind | AI level | Summary |
| --- | --- | --- | --- |
| [Does this distribution agreement meet the franchise agreement test](https://ailawframework.com/precedents/franchising-and-distribution/distribution-agreement-franchise-test.md) | Checklist | Yellow | Test of a distribution, dealer or agency agreement against the meaning of franchise agreement in section 7, and against the exclusions in section 10, of the Franchising Code regulations. |

Signed-in accounts can read the full text of each one.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*