Whether a franchise or other contractual arrangement affects the
status of the enterprise as ``an independently owned and controlled * *
* enterprise,'' depends upon all the facts including the terms of the
agreements and arrangements between the parties as well as the other
relationships that have been established. The term ``franchise'' is not
susceptible of precise definition. While it is clear that in every
franchise a business surrenders some rights, it is equally clear that
every franchise does not necessarily deprive an enterprise of its
character as an independently owned and operated business. This matter
was the subject of legislative consideration in connection with other
provisions of the 1961 amendments to the Act. The Senate Report on the
amendments, in discussing the effects of franchises and similar
arrangements on the scope of the ``enterprise'' under section 3(r) of
the Act, stated as follows:
There may be a number of different types of arrangements established
in such cases. The key in each case may be found in the answer to the
question, ``Who receives the profits, suffers the losses, sets the wages
and working conditions of employees, or otherwise manages the business
in those respects which are the common attributes of an independent
businessman operating a business for profit?''
* * * * *
In all of these cases if it is found on the basis of all the facts
and circumstances that the arrangements are so restrictive as to
products, prices, profits, or management as to deny the ``franchised''
establishment the essential prerogative of the ordinary independent
businessman, the establishment, the dealer, or concessionaire will be
considered an integral part of the related activities of the enterprise
which grants the franchise, rights or concession. (S. Rep. 145, 87th
Cong., first session, p. 42.)
Thus there may be a number of different types of arrangements
established in such cases and the determination as to whether the
arrangements have the effect of depriving the enterprise of its
independent ownership or control will necessarily depend on all the
facts. The fact that the distributor hires and controls the employees
engaged in distribution of the product does not establish the requisite
independence of the distributor; it is only one factor to be considered
(Wirtz v. Lunsford, 404 F. 2d 693 (C.A. 6).) Ultimately the
determination of the precise scope of such arrangements and their effect
upon the independent ownership and control of the enterprise under
section 7(b)(3), as well as on the question whether such arrangements
result in creating a larger enterprise, rests with the courts.
