In a recent report on the status of the Franchising Industry, the Federal Trade Commission knowingly and falsely purported that its Franchise Disclosure Rules are cost effective. In fact; there is nothing inexpensive or “cost-effective” about the 190 to 230 pages of disclosures that franchisors must give to prospective franchisees. Anyone purporting such misrepresentations does so either for personal gain (Lawyer) or out of spite against franchisors due to a misunderstanding of what the franchising model is or how it works.
We see in many industries, for instance real estate, where laws, case laws, regulations have made a simple house purchase turn into a series of forms no less than 400 pages, (it may not look as big in 10pt font and double sided, but it is) and just short of the number of pages in this Federal Trade Commission report. What does all this mean? It means we have further complicated the original reason for such disclosures to the point of absurdity, where each side is so busy trying to CYA, in case of frivolous lawsuits that each side believes they have the right to be irresponsible in their business practices and have no need to fulfill their promises because there is a clause in the contracts and disclosures giving them a way out and behind that way out a lawyer who will be glad to make 2+2 equal 50 if you so desire and have paid the retainer.
It is all a crock, everyone in franchising knows it, no one is willing to say it and the Federal Trade Commission is so busy having meetings with lawyers that they forgot about the original consumer who is not helped in the least by over disclosure as the costs that the franchisors pay in the exorbitant fees to prepare the disclosure documents are passed onto the very consumer that the Federal Trade Commission is claiming they protect. It is total BS to say that such over disclosure helps consumers at all. Just a lie, an excuse for further rule making and minutia piling (BS). Simply helping lawyers to that which they did not earn and do not deserve.
While some might contend that franchise disclosure give vital and pertinent material information to prospective franchisees, such over disclosure hurts that very prospective franchisee if they buy the franchise and become a consumer of franchisor. The extra costs passed on to the consumer are not the only issues to be concerned with, there is also much proprietary information of the franchisor which is in such documents, information such as:
Number of Units expected to be established in the future in various states, Complete set of audited books, complete business structure, name and address and phones numbers of franchisees, often earnings claims which show unit performance by region, etc. all this information makes it really easy for competition to track and crush the fledgling franchisees by establishing stores in those regions and competing with all that information. Information that non-franchised competition do not disclose as they are not regulated in such a manner. This further un-levels the playing field for the franchisee unit and could cause them to go out of business. Thank you FTC. You fine folks at the FTC- “Forgot The Consumer” Again !!! How is it that no one understands this? I see no attorneys discussing these things in their comments? Why? Because the attorneys do not understand the market place and really have no business commenting on the proposed franchise rule changes as they are the ones who have made the modern day franchise model highly unworkable for their own personal gain a fees. The FTC doesn’t get it, the lawyers do not want you to, the consumer doesn’t understand what is happening and the franchisors are drowning in minutia. Wake up. Think on this, debate the topic if you will, but any rational human being with half a brain can see what is happening. Thanks for listening and all the best.
“Lance Winslow” – If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs