Amended Franchise Rule Affects Franchisee Associations
Independent Franchisee Associations Must Be Disclosed
On January 23, 2007, the Federal Trade Commission (FTC) issued amendments to its Franchise Rule, which had been in place since 1978. The Amended Franchise Rule is mandatory as of July 1, 2008. One of the provisions of the Amended Franchise Rule is the requirement to disclose independent franchisee associations and organizations.
Many franchisee advocates including the American Association of Franchisees and Dealers (AAFD) submitted comments to the FTC as the FTC went through its rule-making process. The AAFD participated in round table conferences regarding franchisee associations, and filed lengthy commentary on a number of occasions (AAFD Comments to FTC).
The AAFD was instrumental in securing the new obligation for franchisors to disclose independent franchisee associations in the Franchise Disclosure Document (FDD). The FTC report makes specific reference in a footnote confirming that AAFD chapters qualify as independent franchise associations that are entitled to disclosure under the FTC Rule.
The Amended Franchise Rule should result in prospective franchisees receiving more useful information than they had been receiving under the previous UFOC guidelines. Further, the Amended Franchise Rule’s requirement to disclose associations will give associations more power to play a positive role in working with the franchisor.
Since prospective franchisees will learn about the association in the FDD, and will be given contact information, prospective franchisees are very likely to call the franchisee association for comments.
For an independent franchisee association to qualify, it must meet two requirements. First, it must be “incorporated or otherwise organized under state law.” Second, on an annual basis, associations must, request the franchisor to include the independent franchisee association in the franchise disclosure document by submitting a request no later than 60 days after the close of the franchisor’s fiscal year.
For more information on how create a franchisee association that quailies under the FTC Amended Franchise Rule visit the website of the AAFD.
Regulations
I am no expert when it comes to USA franchising and such. However it sounds to me that it is regulated a lot better than over here in the UK. This particular amendment sounds like the ephasis is being put on the franchisor and can only benefit the franchisee in the long run.
Matthew Anderson
UK Franchise Opportunities Directory
The regulations in the USA...
are honored in the breach by the new franchisors. One must treat any franchise opportunity as if it were not regulated at all. A great deal of what is given to a potential investor is false or at least very misleading. There is no meaningful enforcement of the regulations. If you are fleeced, you have to provide your own remedy. Frequently the remedies available to you have been limited by contract.
The UK is a veritable gentleman's club by comparison.--
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
UK Minister of Industry is SMART about GOVT REGULATION
The USA's regulation of franchising by the FTC was a boon to the Franchisors and fraud is rampant in the United States in the Franchise Industry since regulation was implemented in the late 1970's. Franchising has been durable in world economies because franchisors do not have to disclose the failure of the first-owners of their franchises to new franchisees, and so often it is only the franchisee who fails and his assets go on to serve the franchisor and the economy.
Your Minister of Industry made a good decision when she determined that government regulation of franchising would provide a "false sense of security" to UK citizens.
Minister Hodge indicated that if the BANKS do their due diligence on loans and the potential franchisees do their due diligence on the offering, the potential franchisees will have enough protection from current UK laws governing commercial contracts. Your Minister knows that franchising is very risky and that franchisors will be successful in hiding the risk if the government determines to regulate franchising -- because of their strong influence with your elected officials ----She understands how the actual risk is hidden under government disclosure laws here in the United States, and that many highly visible franchisors have very high failure rates of first-owner franchisees.
Out of your mind?
You are in no position to no the state of franchising in the US let alone the UK.
The Truth Shall Set You Free!
TIF
NatWest / 95% success rate
I see a lot of hype from NatWest bank, and the Brits and Irish still have lots of media quotes touting the "only 5% of franchises fail" which is so debunked in the US that even the IFA disavows the claim.
Does anyone know why NatWest keeps popping up in articles downplaying the risks of franchising? Are they that big in lending to the sector?
Just curious.
TIF's Command.....
of the English language is rapidly going south. Is that no, know or note? What's "out yout mind?" You were so excited at the thought of berating and insulting (trolling) someone that your fingers got tangled.
Long-Standing Forum Discussion, Not Article Comment
These comments are getting off target. Please keep the more general topic of the merits or demerits of government regulation in our long-standing government forum - here - and not in article comments.
Comments under submitted articles are to ask questions of the author or to give insight into the topic matter, which in this case is about the new franchise rule requiring independent franchisee associations to be disclosed in the new franchise disclosure document.
Mr. Blue MauMau
Community Umpire
Item 20 Ranter are you out yout mind?
You are in no position to know the state of franchising in the US let alone the UK.
The Truth Shall Set You Free!
TIF
P.S. Just opportunity to post once more!
Oeps.
You are correct. I am not in a position to understand franchising (regulation) in the USA. I simply took the article on face value.
The Amended Franchise Rule should result in prospective franchisees receiving more useful information than they had been receiving under the previous UFOC guidelines.
Now, to me that sounds like it can only be a good thing. Obviously I jumped the gun though and you took exception. However, some rational debate on the matter would have been more appropriate, keyboard bashing only upsets the keyboard and doesnt convey a good picture of yourself. (red in the face, spitting & spluttering)
Matthew Anderson
UK Franchise Opportunities Directory
Friendly Rhetorical Fire
Matthew,
Just never mind you mind. TIF was tiffed at someone else.
The Amendments have merit when judged in isolation.
However, putting them in place and time dilutes their impact. Place :: 0.1% more coy text of illegible bafflegab. Time :: within the selling/seduction cycle
More sweet sounds from, perhaps, the Dance band on the Titanic?
I saw Harry in 1977 in our London.
Les Stewart
Canada
Matthew - Your comments are reasonable...
I was responding to an anonymous poster dubbed the Item 20 Ranter who spews anti-franchising rhetoric without thought or reason.
My apologies for any confusion and since many posters do not register anonymously at BMM threads are often difficult to follow.
The Truth Shall Set You Free!
TIF