Franchising has been a major feature of the American business landscape for many years now, since before McDonald's numbered its burgers in the millions instead of billions.

The system, under which a producer of a product or service grants an entrepreneur the right to use the producer's name, sell its wares and share in the profits has turned more than a few hard-working Americans into millionaires.

Franchising also has provided a way for companies with a good idea but not a lot of money to expand and grow.

But now, as franchising gears up for explosive expansion abroad, especially in Eastern Europe, some people on Capitol Hill and some franchisees are wondering if the system doesn't need a bit of adjustment.

The House Small Business Committee last month published a report examining the legal framework in which franchises operate and suggested that the deck is stacked in favor of the franchisor. The franchisor is the producer of the goods or services; the franchisee is the owner of the individual outlet.

Franchises come in two forms: product and trade-name franchises, and business-format franchises.

Product and trade-name franchisees generally have the right to distribute the franchisor's products in a certain area or at a certain location, usually using the franchisor's trademark or brand name. Automobile dealerships and gasoline service stations are typical examples.

Business-format franchises, a more recent development and the area where franchise growth is exploding, usually involve licensing of a trademark and a format or system of doing business. Fast-food establishments at typical of this approach.

In both types of franchising, there has been a long history of friction between franchisees and franchisors. Several years ago, many franchisees thought they had been misled by overly optimistic profit projections when they bought in to a number of chains. Tighter regulation of what franchisors may promise has solved many of these problems, the report said, but there remain many "continuing relationship" problems between franchisees and franchisors.

Under the terms of the contracts franchisees must sign, franchisors can require the franchisee to make expensive changes in a shop. Franchisors also can refuse to renew a franchise and they can veto the sale of a franchise.

"The issue is that these contracts are state of the art," said the report's author, Dean M. Sagar, an economist on the Small Business Committee staff. "The best attorneys in the country have developed them over the years for the total protection of the franchisor in all circumstances. They can totally deny due process or legal recourse or compensation" in the case of a dispute.

"The points we are trying to make are that franchisees are not generally aware" of what these contracts entail, Sagar said. The franchisees are focused on their hopes of success "and it is true that franchises are a quick step to operating a successful business ... but the problems come down the line."

Franchisors don't dispute that their contracts are solid, but they view them as essential to providing the uniform, reliable and recognizable format that customers want and depend on.

The International Franchise Association said there are more than 500,000 franchise outlets employing 7.7 million workers nationwide. Franchising accounts for 34 percent of all retail sales, and that figure is expected to reach 50 percent by the year 2000, the trade group said.

If that isn't success, franchisors ask, what is?

David J. Kaufmann, a franchise expert and New York lawyer, agrees with that assessment. "A congressional committee seems determined to kill the goose that laid the golden egg," he says in an upcoming law journal article commenting on the House Small Business Committee report.

Kaufmann said there is a "glut of federal and state laws, rules and regulations governing" franchising, which the industry has only "miraculously" survived.

The International Franchise Association said in a statement: "The pro-regulatory community has long bemoaned its inability to muster evidence justifying more restrictive regulation of franchisors," and added that the issues are "extremely complicated."

In an interview, Sagar said that the object of the report is to raise concerns that should be looked at carefully by franchisees, potential franchisees and members of Congress. He said the Federal Trade Commission has been looking at franchise regulation and its inquiry generated enough letters from unhappy franchisees to attract the House committee's attention.

The chairman of the committee, Rep. John LaFalce (D-N.Y.), said there are "critical policy issues that have not been addressed in any comprehensive fashion by Congress since the mid-1970s, {and} the growing importance of franchising ... makes these issues an appropriate and important focus for congressional inquiry."

They are an appropriate focus of inquiry for any potential franchisee. The purchase of a franchise can involve tens of thousands of dollars, followed by possibly many years of hard work. Franchisees should do their best at the start-up to ensure that they can escape a bad situation and, conversely, that they can reap the full benefits of success.