Is Your Cannabis Business Really a Franchise? FTC May Say Yes

As can be imagined, distinguishing a true licensing deal from a bona fide franchising arrangement can be challenging. However, the difference between these two structures is in fact immensely significant and implicates various Federal and State governing agencies. Without proper guidance, a marijuana business owner who thinks he is operating as a licensee may in fact be working as a franchisee. This scenario, of accidental but in-fact franchising, is typically characterized as “unintended franchising.” More precisely, the (believed-to-be) licensee allows his company to do far more than fly the banner of the licensor/franchisor – instead, this proxy company increasingly begins to operate under the guidance, direction, and control of the master company.