A Fran-what?! Surprise! You may be involved in a franchise relationship and not even know it.(Legal)

IF YOU ENTERED INTO A FRANCHISE AGREEMENT, you'd know it, right? Not necessarily. In several recent cases, companies terminating distributor relationships were surprised to learn that the law considered them franchisors, subject to state franchise laws.

"Most people, including lawyers, think a franchise is McDonald's or Ramada Inn," says Edward Dunham, a partner in the New Haven, Connecticut, law office of Wiggin & Dana who specializes in franchises. But legislatures designed franchise laws to protect a wide range of small businesses that depend on their relationships with particular companies.

State franchise laws address disclosure required at the beginning of the relationship and steps required at termination, including acceptable grounds, how much notice is required, and whether the "franchisee" must be offered a chance to fix the problem.

So what's a franchise? In the typical three-pronged definition, a franchise is when one business operates in close relationship to the other's trademark, is required to follow a certain marketing plan and must pay a franchise fee.

"Most manufacturers think as long as they don't charge a franchise fee, it's not a franchise," Dunham says. But in several recent cases, courts have interpreted other payments as indirect franchise fees, including required payments to a spa manufacturer's co-op advertising fund, and the cost of required dedicated phone lines and ...