Gee , this question takes me back to Tennessee history class in grade school.
The state of Franklin was created after the Revolutionary War, when all the limits on western settlement imposed by the British Proclamation of 1763 were voided. There had long been a regional division in North Carolina between the east and the west. The east had powerful plantation owners , the west poorer settlers, and even before the War the east had maintained control of the state and neglected the west. There was therefore to be expected a strong sense in the west that the expanded territory , divided from the east by the Appalachians and long ignored by them , would want to form a new state when allowed, and almost immediately it became a popular movement, mostly instigated by Arthur Campbell and eventually led by John Sevier. They initially got some encouragement from the Legislature in the spring of 1784. By splitting off the western region and offering it to the Continental Congress, the Legislature hoped to reduce their War debt, and the western representatives would later complain hearing from the eastern ones, " The inhabitants of the western country are the off‑scourings of the earth, fugitives from justice and we will be rid of them at any rate'." The debate was contentious, but the act passed. The government of Franklin began to form, with the expectation that they would become another state in the Confederation.
However, the summer of 1784 saw new elections in North Carolina, and the anti-Franklin faction successfully used it as a campaign issue. The new legislature and governor repealed the act. The government of Franklin, however had already formed, and sent their representatives to the Continental Congress in May 1785 asking that North Carolina be held to its original agreement and Franklin be admitted as a state. They were unable to get the two-thirds majority needed for approval. Unwilling to go back, Franklin conducted business as though it was not a part of North Carolina but like it wanted to be a state. Though not a part of the Confederation, it still grudgingly abided by the terms of the Hopewell Treaty with the Cherokee, in 1786, negotiated by the Confederation, that superseded their own treaty. They perhaps could have done more to sway some more votes in Congress - when they joined with some other malcontents in Georgia to make alarming noises about moving against the Spanish domination of the Mississippi Valley, it likely made it even more difficult for them to join. But the last real blow to Franklin's statehood was the Constitutional Convention of 1787. The new constitution allowed the formation of a new state from the territory of an existing one only if the existing state agreed. North Carolina, in other words, was to be given the last say in whether Franklin could join the union.
Despite this, over the next couple of years Franklin hung on. In a way, this was a dispute between land speculators fighting over Cherokee lands, and with the Cherokee, and the inhabitants of Franklin stood to lose under the North Carolina government. There was some hope that North Carolina wouldn't ratify the new constitution and then Franklin itself would somehow get into the new US: but that failed. After North Carolina ratified the new US Constitution, and after more and more comic and tragic conflicts with North Carolina and the Cherokee, in 1789 Franklin essentially gave up waiting and went back to being part of North Carolina. Despite the re-amalgamation of Franklin, there was a sense that there would be a division of North Carolina, and it was only a matter of time. Tennessee was successfully split off and made a state in 1796. John Sevier was its first governor.
It's hard to think of Franklin as really an independent nation. It was a hard-scrabble place. As its settlers moved into Cherokee lands there were constant clashes that were exhausting. Commerce was done without currency, and the impression you get is that the government could only be of the most basic kind. Hugh Lawson White, later a senator of Tennessee, recalled an interesting example of the tax collectors managing to be corrupt
.... the governor, chief-justice, and some other officers, were to be paid in deer skins; other inferior officers were to be paid in raccoon skins. Now at that day we were all good whigs, although we had some of the notions of the democrats of the present day.
We thought those taxes might safely remain in the hands of the collectors until wanted for disbursement. The taxes were, therefore fairly collected in the skins and peltry pointed out in the law. But the collectors knew, report says, that although raccoon skins were plenty, opossum skins were more so, and that they could be procured for little or nothing. They therefore, procured the requisite number of opossum skins, cut the tails off the raccoon skins, sewed them to the opossum skins, paid them into the general or principal treasury, and sold the raccoon skins to the hatters.
It didn't want to be a nation. It was formed to become a state of the Confederation and persisted in hoping to become a state of the Confederation, even abiding by Confederation treaties as though it was already a state. Poor and precarious and ill-defined, it's hard to imagine it could have continued for much longer than those few years. But in his history, Tennessee jurist and scholar Samuel Cole Williams decided it qualified to have been, however briefly, its own country.
The legislature and the judiciary of Tennessee [later] had to solve a number of problems that were the results of the Franklin regime: the status of marriages consummated under Franklin licenses; of judgments rendered by the courts; of administration of estates, etc. The situation dealt with was one without parallel in American jurisprudence, since Franklin was and is the only example of a de facto American State that functioned in every aspect of statal power.
Samuel Cole Williams :History of the Lost State of Franklin