I hope you will be successful in your efforts to fight the “beast” of franchising that needs to be tamed. Because the FTC Rule actually acts like a blank check for franchisors to trick and con franchisees to grow THEIR profits with immunity and impunity under the law, they do use the contract to lie, cheat, and steal, as they are so inclined.

My family was involved in a failure of The UPS Store franchise and I have spent months researching the “how” and “why” of the pain of failure to thrive in this franchise for us and for so many others who were deceived by appearances and especially the appearance that there was some government oversight of franchising.

When you look at Item 20 of the UFOC with the knowledge that the only way you can do your due diligence as to survivability and profitability is by interviewing franchisees, you understand that the government’s failure to mandate unit performance statisrics is long-standing public policy to subsidize the franchisors. If franchisors make no representations in the FDD or the Contract, they have to spin outside of the contract to sell the franchise and not get caught —-and then they are home free in the courts when you sign the binding contract. “The Art of the Deal and the Art of the Steal.”

Please read The FTC’s Franchise rule: Twenty-three Years after the Promulgation —the testimony to the Subcommittee on Commerce, Trade, and Consumer Protection, June 25th, 2002, of Ms. Susan P. Kezios, President of the American Franchisee Association which is available on a Google Search. Thank God for Google Search and Google, the University of the People and the FOIA, etc.. that does preserve and provide information that protects our democracy.

Ms. Kezios is an attorney and she points out how the FTC Rule misleads prospective franchisees in her strong statement to the Committee. (you could provide this in your letter to your Governor.) Since she and Robert Purvin of the AAFD, another attorney, and author of the book, Franchise Fraud, also made public comments to the FTC on these same matters in 1997 and the FTC ignored them, we can understand that the FTC doesn’t just move slowly on behalf of franchisees but the FTC doesn’t move at all to protect prospective franchisees before or after the contract is signed.

Thanks again! Keep me posted.

Carol

These experts must know, however, on some level, that a majority of prospective franchisees don’t understand the “game” that is being played and don’t understand that what they think they have seen in the sales process and the UFOC/FDD is not always what they are likely to get.

The majority of prospective unsophisticated franchisees are in a state of mind at the time of purchase that is the result of a concentrated and premeditated Public Information Campaign in support of federal regulatory policy to present franchising as relatively RISK free because the franchisee is buying a “proven” plan from a “proven” franchisor, whether a new franchisor or a long-established franchisor of many units.

Why would franchisees put their personal assets at risk and sign long-term adhesory contracts with franchisors and landlords that represents hundreds of thousands of dollars of debt and put their personal assets at risk with personal guarantees unless they BELIEVED that the franchise purchase was relatively risk free and that they would earn profits and success in their investment?

While the experts and the pundits stress the DANGER of not doing due diligence and “shame” those who haven’t when they complain of failure, they do little to educate the public about the legal “trap” of the UFOC/FDD and the adhesory franchise agreement that comes in a “package” and that protects franchisors from claims from failing franchisees or failed franchisees of fraudulent inducement/fraudulent concealment of material facts in arbitration and in the courts AFTER the buyer franchisee has signed the boilerplate franchise agreement.

Only a few attorneys like Richard Solomon of Franchise Remedies explain that the franchise agreement can be a License to Lie, Cheat, and Steal in the hands of predatory franchisors who operate with immunity under the law as long as they have the signed agreement with the Integration and Acknowledgment clauses to present to the courts. Franchisors are NOT subject to truth in advertising laws and are allowed to hype and sell with immunity under the law with their Press Releases and their Websites as long as they make NO misrepresentations of success or earnings in the FDD or outside of the FDD that the franchisee can prove he/she has “relied” upon.

The experts in franchising do little to explain to the prospective franchisees before the purchase that the Regulator, the FTC, and the State, and the SBA Franchise Registry and the franchisors themselves all DISCLAIM that they are endorsing the franchise that is being sold to the public as being viable and valuable. Advisors and attorneys don’t explain to the prospective franchisees that if you fail, there is generally NO recourse in arbitration and in the courts and that you could lose everything because of your personal guarantees.

The FATAL FLAW of the FTC Rule is the failure of government to require franchisors to disclose, or make available, the unit performance statistics of their systems to new buyers of the franchises.

This fatal flaw brings franchisees to invest UNKNOWINGLY in high-risk and unviable franchise offerings and this is not worthy of “free market” capitalism that co-exists in democratic free Republics.