Franchising Australia 2006 Survey
Submitted by Don Sniegowski on Mon, 2007/04/02 - 08:34.
A survey of Australia's Franchising Sector conducted by Griffith University's Service Industry Research Centre. It is similar to the International Franchise Association's KPMG survey of how important franchising is to the American economy. The survey shows impressive growth in franchising and importance to the Australian economy.
- There are approximately 960 business format franchise systems in Australia in 2006 compared with 850 in 2004 and 700 in 2002.
- The growth rate in franchised units from 2004 to 2006 was 14.6 percent.
- Franchising contributed 14 percent to Australia’s Gross Domestic Product (GDP) in 2005.
Note: The survey is a 79 page report in pdf format. The link is slow to upload in North America.
Surveys
Well we need to survey the families who have lost it all in this billion dollar industry and who are they surveying.....the crooks ( The franchisor) and their partners in Crime (The Banks and the Landords) - Franchising will be Australia's next national disaster and I pray our nation will stop this from happening, don't be fooled by surveys such as this.......
Ruth
Surveys as Red Herring --Stay angry, Ruth!
Ruth ----stay angry and continue to agitate for better disclosure of the risks of franchising. I truly hope that you can make a personal recovery from your great losses and that your involvement in trying to get the word out will help you to heal and will help others in Australia. But, remember to watch your back as powerful forces are not adverse to approaching whistle blowers from the "back" and stealing their "whistles"!
Surveys by groups who have much to gain are often suspect. In franchise surveys, where they misrepresent failures as transfers and turnovers, they can skew the statistics and, of course, even government sponsored research and surveys can be skewed. Even academic research can be skewed to the benefit of those who are providing the funds to support the research.
Since one can buy "research" in the marketplace to support one's position if one has enough money, it has been possible to hide the actual and real rate of failure of franchised business plans and the real profitability of these plans as realized by franchisees.
Australian Franchising Farce
Australian Franchising is generally successful for all parties but when the shonks destroy lives by the hundreds there is no protection. The Law is weak and the regulator is weaker. They deliberatley mislead the Australian public as to the number of victims.
They know that franchises are taken back for a pittance and they don't class that as a failure. It's a transaction. They know that Franchisees walk away from their business losing substantial amounts and they don't call that a failure because the business continues. They know that ex-franchisees go bankrupt months after they have walked so they on't attribute the bankruptcy to the Franchise.
The politicians turn a blind eye so then it's left up to the angry mob to demand justice through the media. What is absolutley stupid is that good franchisors don't see the need to demand that Franchising is protected from the scam operators that damage the reputation of Franchising.
Australian survey transparency
The Australian survey of franchising was sponsored by the Franchisor Council of Australia. The parameters of the survey were delivered along with the payment.
The survey involved approximatley 200 franchise systems. This is the same number of systems represented by Deacons Lawyers. Deacons senior partner and Chairman of FCA, Stephen Giles, runs the FCA portfolio of Industry Regulation and Government Relations [BS and propaganda].
The value of the survey is not what is in it but what was ommitted. From the reading of this survey it is obvious that the basics weren't even effectively investigated. No one knows exactly how many franchisors there are, or how many franchises there are or how many franchisees there are - or how many of each category failed and what the consequences were to either the individuals or the Australian economy.
And it doesn't tell us how many holidays and lunches were shared in any period where our politicians turned a blind eye.
All that aside - we have our inquiry Ruth and one way or another we are going to either be given something meaningfull or we will make them all pay. And that is a given.
Surveys----- Ruth in Austrailia
I hope, Ruth, that you will be able to reach your Government with stratistics on who loses in franchising and that your government will ptotect franchisee citizens to the best of their ability.
We know that franchising is here to stay and it is spreading throughout the world ----that is becoming so much smaller and in which the global capitalists will cooperate to maximinze their profits in a global economy. It is a redistribution of capital from the pockets of those at the bottom to those at the top, a means of acquiring cheap labor, and a means of reducing the risk for the franchisor who uses the capital and labor of the franchisees to produce royalties in return for using their "proven" business plan that has been franchised.
The concept of franchising allows the franchisors to experiment with concepts that may or may not catch on and the franchisses provide the "venture capital" to spread the concepts into the marketplace. Generally, the franchisor corporate owners can protect their personal assets under the corporate veil but the franchisees, who borrow against their houses, personal assets, and savings lose everything when either their individual busines fails, or the concept dies and the franchisor fails.
When franchisees fail, franchisors can continue to prosper as long as the assets of the failed unit go on to serve them or they sell another franchised unit to replace the one that terminated in failure. From the first day a franchised business opens until the end, either in failure or until the end of the contract term, the franchisor collects the royalties on the gross sales produced by the franchisee.
While there are franchisees who have profited greatly with viable business plans and we see the evidence of them in socciety, many of those we see are actually indentured; i.e. STUCK in a franchised business that pays a minimal salary for long hours of work and no benefits, etc. and no actual profits. The STUCK FRANCHISEES can't quit because of the terms of the contract that would require them to pay thousands of dollars in royalties to stop operating their businesses. It is hard to sell a break-even business that carries debt and to get out from under the debt incurred to build the physical unit that bears the brand name. The "royalties terms" in the franchise agreement assure that the "break-evens" are STUCK
If franchising is fair and the actual failure rate of the business plan is disclosed and the actual cost of the buying the franchise is disclosed under law; i.e. the cost of the long-term lease and the personal guarantees on both the lease and the franchise to permit franchisees to assess the TRUE and Real risk of buying a franchise, I am not against franchising.
I believe in free markets and when franchising produces profits for both the franchisor and the franchisee and it works more like a partnership than a master-slave relationship, and the franchisee is fully aware of the risks and wants to take the risks, why not?
If franchising is a truly valuable concept that benefits society, then franchising should be able to survive disclosure of the true risks involved in purchasing any franchised business plan.
Good Luck, Ruth!
AUSTRALIA AND FRANCHISING
One of the really great things about Australia is that it was settled largely by my people. As Australians are quick to point out, "We were selected by the best judges in England".
They have been used much as any country uses its colonials - the Battle of Gallipoli being a perfect example.
That said, however, their system of commerce must, by necessity, mesh with the commercial/legal commerce systems of their major trading partners (which today includes most of the countries of the world.
They have to accomodate the trading exigencies of Europe, the USA and Asia. This means that, much more than here in the USA, they have a longer and more interdependent set of commercial relationships with Asian countries than we do here in America.
Their franchise "rules" and the practices in franchising there, mirror the USA/British models because most of the franchisors are American and they are influenced by IFA perspectives on franchising and the British legal system.
Every day there are Australians on my web site obtaining primarily the Franchise Fraud Symposium Tutorials. Are they making Australian franchise investors more savvy about what's behind the franchise sizzle? I can only hope so.
My point is that I too believe that educating prospective franchisees is the only way to overcome abusive tactics. AAFD and their ilk go about it their way, and I go about it in my way. I don't fight wars (and I see the conflict as defending your personal wealth from raiders) by seeking accomodations from barbarians. I believe that barbarians must be confronted for what they are and treated like animals when they act like animals.
I know many good franchisors. I have represented many franchisors as well as many franchisees. I know the story from both sides. I probably have missed out on getting franchisor clients for what I write, but I have never lost a franchisor client for what I write. Unless they are simply without scruple, I can usually find a way to show a franchisor how to get where the company wants to go without cheating.
Finally, I have to be fair and recognize that much of what people in here call cheating aint cheating. It's the terms of contracts that no one forced you to sign. You can't sign contracts and then cherry pick what you wish to be bound by. You get the Full Monty in contracts. If it were otherwise, the reliability of commercial agreements would collapse.
Richard Solomon/Seamus Ignatius Muldoon
www.FranchiseRemedies.com
You don not have any facts on failure rates in the US or AU
Where are the thousands of failed franchisees? What is the body count? Is the failure rate any different than independent business failure rates?
Guest quote - "It is a redistribution of capital from the pockets of those at the bottom to those at the top, a means of acquiring cheap labor, and a means of reducing the risk for the franchisor who uses the capital and labor of the franchisees to produce royalties in return for using their "proven" business plan that has been franchised."
The above quote is anti-capitalist, anti-business, anti-franchising, socialistic through and through and consumately false. Franchising in the US and AU has been tremendously successful.
Franchising Australia --SBA Registry ---Who is FranData?
Just who is FranData that is associated with the SBA Registry. Is this one of those "cooperative agreements" put out by the government --or what?
Where are your facts? Failure rate is hidden in UFOC
If Americans are forced to choose between socialism and fascism, I'm sure you know what the outcome will be. When government becomes too heavily involved in an alliance with big business, the risk of democratic societies being taken over by fascist forces is very great.
The alliance of government with business, when presented as a solution for the "public good", often is good for big business and government and not so good for the masses. Study your history.
I agree, franchising has been tremendously successful for the franchisors. Where are the bodies? The bodies are hidden in the silent failures who fade away into the American scene through the transfer column in Item 20 of the UFOC.
That old "red herring" ----"Is the failure rate any higher than
in an independent business? Who knows? So many conflicting statistics put our by people who have a conflict of interest and those who don't. And what has this got to do with hiding the true and actual failure rate of franchised business plans?
A Great Company!
THE REGISTRY is a GREAT program that benefits both FRANCHISOR and FRANCHISEE if all concerned understand what the registry is and isn't.
As for FRANDATA, it's a very good company which can be very beneficial to any prospective franchisee performing due-diligence, or to those who are performing due-diligence on behalf of the prospective franchisee.
Short Version: Frandata was founded in 1989, and has grown into the franchise industry’s number one source for objective information and analysis. In early 2004 Frandata was acquired by its former company president Darrell Johnson (not to be confused with Darryl “Moose Johnston). Read Press Release
Frandata Uses its proprietary software to access data from various sources, including its library of more than 15,000 Uniform Franchise Offering Circulars, FRANdata supports the research and competitive intelligence functions of franchisors, helps franchisees evaluate different concepts, provides information and analysis for legal and financial organizations, and provides marketing access to franchisors and franchisees.
Frandata also manages the Franchise Registry for the Small Business Administration.
Now that you know what Frandata does, it’s equally important that you know what they do not do. It is FRANdata's belief that to be an objective source of information, it cannot be perceived to have potential conflicts of interest. Therefore, FRANdata receives no advertising or other fee arrangements that might influence its analysis, services and products.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
You have no statistics
find some facts and quit making things up
Facism and business
Businesses do not want either facism or socialism. We want less involvement from government period. You need to check history a bit kind sir!
You failed in your UPS franchise
and you are a loser! And you want your pound of flesh from franchising. You want only to punish. You are consumed in vitriol.
Is FranData supported by government by way of a contract?
How does FranData support itself?
SBA-Preferred Lenders--Franchise Registry-FranData Fran/Vet
In Franchising, the only loser, except when the concept fails, is the franchisee, who has put everything at risk and who loses almost everything in failure. When government cooperates in hiding the TRUE RISK to the benefit of those who stand to gain and to the disadvantage of those who lose so much, this is not democratic.
The alliance of business interests with the SBA and the government programs that benefit the franchisors, the bankers, the lenders, the Landlords, the developers, etc... is fine if it doesn't become public policy to hide the real risks of franchising from the consumner franchisees, the unsophisticated investor who uses their hard earned savings, their house, or an SBA Loan (that is tax-payer guaranteed) to buy a government regulated? franchised business plan.
Go back and read Eisenhower's speech wherein he warns of the dangers of the military-industrial complex and the cooperation of The Congress with the huge corporations ------who are now multi-national and interested in maximinzing their profits in the global economy.
I wish Mr. Blue Mau Mau would publish Eisenhower's speech but I know he won't.
Vitriol or Truth that is so frightening?
I am not a loser. I use our failure with UPS to attempt to put a flood light on the public policy that is now the status quo to HIDE THE TRUE FAILURE RATE AND THE TRUE RISK of purchasing a franchised business plan.
I am not protecting my interests as all of you, who get out here and call me namnes, are doing. I'm beginning to think that the failure rate overall must be very high and this truth frightens you because perhaps if the true rate were known, it really would inhibit franchising. It must truly be that statistics would indicate that one third make it with profits, one third fail, and one third are indentured at break even.
It's funny that you talk about "pound of flesh"! How many pounds of flesh has MBE-UPS provided through their churning practices to be picked and eaten to perpetuate their visibility on the American scene? The blood doesn't go to the blood banks, you know!
FranData is a government tool
Yes. They are part of my covert and stealth plot against franchisees across the country. FTC, IFA, SBA and the gang of nine major franchisors use the collective database of FranData for covert acts against the "little guy". And the major SBA Registry contract contributes to our effort. Another example of our tax dollars at work for the good of corporate America
By making a profit?
They probably do it like most successful business, by making a profit on the Products & Services that they sell.
How does the Franchise Registry Work
Here's a Special Report prepared by FranData for Franchising World titled The Profile of Franchising: 2006.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
We should have a Franchisor Tax that'll fix em
We should specially assess franchisors to fund regulatory oversight of franchisor's franchising practices. This way could have a full time special prosecutor and enforcement officers to ferret out the wrong doers and protect the little guy. Instead of allowing franchisors to benefit from the FTC, SBA, FranData, etc…
Eisenhower & Australia?
You make it sound as if someone always loses in Franchising, simply not true.
A large percentage of all new businesses fail. DO NOT INVEST MORE THAN YOU CAN AFFORD TO LOSE. Weigh the reward, measure the risk, make wise business decisions. It is really quite simple! Franchising can be less risky than an independent business, but it is not without risk. Only one person determines the amount at risk, the one who is making the investment.
The government does not cooperate with anyone to hide any risk. The role of government is not to eliminate risk or to protect one from all risk. The government must attempt to balance the interest of all concerned.
There are no evil governmental alliances; however it is necessary for government and business to work together in a way that is good for all. If it were not for programs like the SBA loan program many entire economic classes of people would be bared from owning and operating their own businesses. People should have the right, with minimal governmental involvement to determine how they invest their savings, their home equity, their 401Ks and IRA’s, after all it is their money.
What does Eisenhower’s speech have to do with anything. Why should “Mr. Bluemauamu publish it. If you see the relevance, publish it. Register here at Bluemaumau and start your own blog. Start a new Forum; title it ‘What Eisenhower Warning on Franchising’. FURTHERMORE, very few franchisors would be considered ‘Big Business’, the majority are clearly well within the governmental definition of Small Business.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
How are they connected? FranData and SBA Franchise Registry
I read your FranData special report and, of course, there is nothing in there about the failure or success rate of franchised business plans but they did provide some graphs on earnings claims, etc... It seems to just be a PR vehicle for franchising.
But, what I am asking, did Government ask FranDats to tie up with the SBA Registry, or what?
A Special Task Force with Police Powers and Franchise Courts
We should suspend the parol evidence rule and habeas corpus so we can allow in all that extrordinary evidence to prove franchiees cases and we jail franchisors before, during and after trial.
Eisenhower and Australia?
Good Morning, Dale!
I noticed that you said there are no "evil" governmental alliances indicating, perhaps, that you do see and understand that there are governmental alliances with business that are represented as being for the "public good"!
You will admit that the SBA-Fran-Vet-Fran-Data-SBA Preferred Lender and SBA Franchise Registry being one in which government and private franchisors are involved.
You know, Dale, that I didn't say and haven't ever said that "someone always loses in franchising." You misquote me to make your point. What I did say is that when the franchisee loses, the franchisor may still gain, and that franchisees generally lose almost 100% of their investment in failure. The franchisee is the guaranteed loser in the relationship while the franchisor may still survive and gain on the franchisee's failure as in churning and turning.
I hope you truly believe what you say, "The government does not cooperate with anybody to hide the risk." It is so obvious that the regulation of franchising is a subsidy for the franchisors by government that keeps the fires of development going to the benefit of the banks, the lending institutions, the Landlords, the Developers, etc..
I understand that Government rationalizes cooperating with the franchisors as serving the "public good" and, always, throughout history, there have been arguments and cases made for sacrificing the few to help the many.
It may be that franchising would not survive full disclosure of the risks and that the end does justify the means but one cannot claim that the means are democratic.
FranData selected to administer
What did you expect from a FREE Report. If you are really interested in statistical data on succes and failure you may want to ask Frandata to prepare you a report.
As for the connection ... yes the SBA which is a governmental agency selected FranData to administer the Registry. Pretty good choice considering the amount of Franchcise data that they have and manage in an unbiased manner.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Yet another O Lordy
For the record, I will admit that the government has nothing better to do than to scheme at depriving franchisees of their investment capital by conspiring with franchisors worldwide. The war in Iraq? Contrived to further divert Americans from the truth. SARS? Same thing (the fact that it impacted Toronto was merely poor execution and problems with logistics, it should have been Buffalo). But the question you should really be asking yourself, is why?
Because, ala Monster's Inc., the government has facillitated a means of removing our foreign reliance on fossil fuels, but it comes at a cost of the wails and lamentations of our own citizens. Yes, the screams and frustration you experience from being defrauded by the franchise-industrial complex helps to sustain this nation's power grid and fuel consumption. So if you are content, humming along in your Tahoes and Expeditions, but upset at how UPS has undermined the fabric of your financial security network, ask yourself if you really aren't at fault as well. Your penchant for driving SUVs in turn exacerbates the horror that is your reality (if you're driving a Prius, I got nothing).
Does FranData get Paid to Administer the SBA Franchise Registry
Was this put out on bid?
Fran Data SBA Franchise Registry
Therefore, Dale, we know that Fran Data was hired and will be paid by the SBA with tax money to push franchising through the provision of unbiased and objective information about franchising and to push "quickie loans" available from the SBA to franchisee prospects.
In keeping with the "deal" that was made between the franchisors and the regulators way back in the 70's, there will be no discussion or statistics concerning failure rates or success rates in any free reports to the public. I understand!
However, you indicate, Dale, that FranData will provide a "due diligence" report for members of the public upon request if prospective franchisees pay for reports.
Does this mean that FranData will critique the UFOC of a certain franchisor and provide the real failure rate of the franchised business plan which would be the SBA failure rate and the failure rate hidden in Item 20 of the UFOC?
Bubba Talk ----O Lordy
Thanks for that very apt description that I can use in future posts, i.e. "THE FRANCHISE-INDUSTRIAL COMPLEX" that may not be too far from the truth.
Have you read Eisenhower's final speech lately, Bubba. I suggest that you read this speech and think seriously about all the "cute" comments you throw out to divert the attention from the truth. If General Eisenhower could imply to the American people that the Congress colludes with "business" big money, and that this may undermine our democracy, I, with much lower rank, am free to do so as well. Am I not, Bubba?
The balancing of the economy is a finely balanced and difficult matter for government and a "good" economy is necessary to the safety and security of a nation. Some policies must be developed to serve the "public good" but when the "public good" is defined only those big money interests, those big Capitalists, who now have a Global Economy in which to maximize their profits, the American people may be the losers.
It is not just we little posters on Blue Mau Mau who are questioning the government alliance with the Corporations, it is good minds like Lou Dobbs and John Edwards and John McCain and many who are out on the campaign trail.
Have the good jobs in this country disappeared almostly exactly in proportion to the increase in franchising that has occurred in the last twenty years?
Are franchising jobs, mostly PT and with no benefits for the employees or the owner-employees the new jobs that have been created by the Administration?
Come on, Bubba, be fair. Of course, the American people are at fault because they have been urged to drive big gas consuming cars and have been brain washed to believe that fossil fuels are inexhaustible and that a new source of fuel to drive our automobiles is right around the corner. The big car manufacturers didn't want to bite the bullet at the loss of any of their profits and look where they are now. We have had gas shortages since the end of the Vietnam War and nothing has been done about it.
Common sense is thrown out the window and short-term great profits for the automobile manufacturers and the oil companies and the golden parachutes overrule any truly effective long-term planning for. I have a friend who says "Driving in California is like driving in a box --you have an SUV in front of you, to both sides of you, and in the back"! Just who was it who encouraged the American people to buy their gas-guzzling SUV's and now the fasionable HMV and you want to blame it on the American people, Bubba.
Where are you coming from?
FranData is probably owned or controlled by Haliburton
insider deals!
What does it matter?
What does it matter if they do or if they don't? It has little bearing on their ability and qualifications to administer. The government does tend to utilize civilian contractors.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Fixated are we?
Yes, a civilian third party was hired by the government to facillitate the SBA loan process for franchising, but how is this a conspiracy? In actuality, this is not unusual and is done with some regularity.
You reference a "deal" between regulators and franchisors. Wow. Were you there? Did you take stenographic notes during this "meeting?" Did you record the discussion from a shadowy corner of the room? If so, show it to us so that we can bask in the warmth of its revelation. If the only basis for your claim that there is a "deal" is the fact that Item 20 has the potential for abuse, then I think that you are in for a rude awakening. Life is not fair. If it was, then we'd still be in the Garden of Eden eating everything but apples. A crappy regulation on disclosure does not a conspiracy make. Your insistence that this is the case, despite a lack of evidence to support such a claim, makes you appear more than just a bit paranoid. Simply because the government has not chosen to increase regulation on the matter does not mean that it is thus actively attempting to defraud prospects. Correlation does not equal causation, cause otherwise we could solve global warming with a larger pirate population.
The SBA and FranData do not, to my knowledge, push "quickie loans." They merely provide a service. You are free not to use it. If you dislike their terms, there is nothing to preclude you from seeking financing at your local financial institutions. As you believe this so strongly, provide us with evidence to support your claim, rather than merely regurgitating your almost dogmatic position that it is so because you have claimed it to be so. I do so want to believe...turn me to the conspiracy...
Fran Reg'ry. Is & Isn't
I did not say that they got paid or did not get paid. I guess you could call them and ask them or you could call the SBA and ask them.
There are no deals between franchisors and regulators. If you don't think that regulatory compliance is an issue for franchisors you are sadly mistaken. I did not say that their would be no statistical data regarding success or failure to the public. I said the report which I provided the link to was a free report prepared for Franchise World. It was not intended to be a report on success and failure.
I did not say that FranData does due-diligence for franchise candidates, I said that Frandata is a great resource for information in the performance of due-diligence.
I do not knw if Frandata would perform a critique of a UFOC, that is not their business. They do have the resource to provide statistical data regarding the franchise opportunity compared to other franchise opportunities.
Seperate the primary business function of FranData from their administrative role for the Franchise Registry and understand what the franchise registry is and isn't. Inclusion in the registry is voluntary. It does not pre-qualify the candidate. It pre-qualifies that the Franchise agreement does not provide an unfair or overly advantageous to the Franchisor over the Franchisee.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
You have no facts...
You should find some empirical data and quit making things up.
General Eisenhower's speech is irrelevant to franchising
Franchising is primarily a small business enterprise for both franchisor and franchisee. Futhermore there is great diversity by industry with no clear dominant provider in any one sector. Hence there is no "Franchise Industrial Complex" to speak of.
In fact General Eisenhower would likely have praised franchising the IFA, SBA and most of all FranVet. He would have disliked your socialistic and communal ideals and the role of government in business.
SBA Default List Franchise Loans
Will Mr. Blue Mau Mau be publishing an uptodated list of defaults on SBA loans that are routinely furnished to the banks?
The SBA Default List on Blue Mau Mau is outdated.
It is interesting that the SBA will guaantee loans with high failure rates but, of course, the banks adjust the rate of the loans commensurate with the risk.
Those franchisors who hide the failure rate of their first-generation franchisees in Item 20 of the UFOC really mislead both the prospective franchisees and the banks, don't they?
FRANdata Ownership
I believe ownership was answered in detail.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
It's the Franchise Industrial Complex that is the problem
It must be destroyed and a cooperative set up in its place. Maybe a government and "common man" run construct where people are valued over profits. We could nationalize the existing franchisor enterprises and free the indentured franchisees from the shackles of servitude and enslavement. We can no longer tolerate the money grubbing franchisor globalists. There is a beeter way!
Bubba Bubbles Item 20 DEAL
Bubba! You are so intelligent. I can't understand why you can't see that Item 20 was a DEAL when the Congress first determined that they would have to do something about the worsening fraud in franchising and regulate franchising to protect the public without inhibiting investment in franchises.
The fact that Congress gave "franchised business plans" that would involve investments of varying amounts of capital by sophisticated and unsophisticated investors to the FTC to regulate under Rule, with invited comments from the public, indicated that primarily, the interests of "commerce" would be protected while attempting to protect franchisees from the most obvious frauds.
The Congress in no way would be party to drying up "venture capital" that is so vital to our economy and the economies of the world who operate under "free choise" and "free markets" and "free enterprise" systems. The FTC was charged with regulating franchising to permit the government to intervene in the most overt and obvious cases of non-compliance with the Rule or fraud in law but not to inhibit the new business model of franchising that could be so helpful to our ever-changing economy.
The FTC must have had to discuss among themselves and with the franchisors those vital and material facts that should be disclosed to prospective buyers of franchises who would be putting large amounts of money at risk to buy a franchised business plan. Certainly, the FTC knew that the actual and real risk of failure and/or the success rate of the franchised business plan would be a material fact that the prospects would want to know and that should be provided by the franchisors under disclosure rule and laws.
But, of course, the franchisors advised the FTC that a requirement to clearly and plainly disclose this material fact under the Rule and under State Laws could result in the inhibition of investment in franchising and that it would be difficult to measure how much such disclosure would inhibit investment in new franchises of new concepts, as well as inhibiting investment in those old franchises that had been around for a long time. It could perhaps be damaging to the economy to take such a risk and why would it be necessary.
While the FTC would never agree to tell an untruth, the FTC could compromise and agree to require disclosure of truth in disclosures that would and could help the prospective franchisee in due diligence but that would not hurt the franchisor by requiring the franchisor to clearly and plainly reveal the rate of failure or success of the franchised business plan under disclosure rules. This material fact could be obscured in the statistics of Item 20 but the material fact could be discoverable through the "due diligence" of prospective franchisees who would and could discover the reasons for the "turnover" represented in the transfer columns if they were interested in finding out the reasons.
I'm sure that the FTC knew that the transfer columns in Item 20 could contain both success stories and failure stories but the success or the failure rate of the franchised business plan was not something that the FTC would have to know to issue a Rule under which franchising could be regulated by both the States and the Federal Government to not clearly indicate the success or the failure rate of the franchised business under the Rule or the UFOC's.
This compromise that is perfectly legal is a subsidy of franchising and public policy that the FTC considers to serve the public good and is the long- standing status-quo. But, we have to hope that government will understand that franchisors shouldn't misuse this subsidy from government and develope predatory management policies that permit them to cheat their first generation frsnchisees in the interests of their own profits. Predatory franchisors use this subsidy to present the appearance of viability through churning visability and sell unviable franchises to that segment of the public who misinterpret visability with viability of the business plan and who don't invest in objective and killer "due diligence" from due diligence experts like Richard Solomon, Michael Webster, and Paul Steinberg.
Hence there is no "Franchise Industrial Comples" to speak of
If there was, we wouldn't speak of it, would we? If you can't see that the ineffective government regulation of disclosure of the real risks involved and the one-sided contracts of adhesion are public policy and a subsidy of the franchise industry, what can I say?
If you believe that the failure and the success rate of the franchised business plan should be obscured from the view of franchise prospects, what can I say.
I suppose you would tell me that the success rate and the failure rate of the franchised business plan is NOT a MATERIAL FACT and RISK FACTOR that should be disclosed under law, because if the risks were disclosed, the franchisees would not need help from all of the due diligence experts out there, or what? Is the prospect of effective regulation a threat to you.
I assume you read General Eisenhower's speech and his warning to the American people and this is why you believe that it is irrelevant. The definition of a "small busdiness" under SBA guidelines is not so small and now the SBA is advertising a Franchise Registry to encourage a faster loan process for the banks and the consumer franchisees, and they have a preferred lender list as well!
I would like to have my taxes spent on a government study to produce accurate and true statistics on franchising instead of stuydying the sex life of the frog.
You know that this "venture" capital, to a great extent, is provided by the franchisees and, therefore, the government should effectively disclose the true risks of failure and success under law and franchising should be regulated at least as well as securities are regulated under SEC rules and law.
Time, Energy, Effort
Have you ever asked yourself "Why are there so FEW complaints to the FTC regarding franchising"? Could this possibly be because there is no Huge Wide Spread Problem?
Did you know that for every 1 complaint on franchising there's 16 for a non-franchcised business opportunity. Hmmm Perhaps current franchise regulation both mandated and voluntary aren't doing such a bad job.
Perhaps your time, energy and efforts might be better invested dealing with real consumer challenges such as Id Theft where the complaints are 36% of all received by the FTC vs less than 1/10th of 1% for franchisng. Or you might choose another from this list.
You might be able to provide some real protection, where it's really needed.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
The problem
Is that you have a little bit of this, a little bit of that, fill in the gaps with superfluous fluff, and you think you have a persuasive argument. Yes, the SBA, VetFran, etc all have a relationship, but I cannot agree with your proposition that this relationship is indicative of anything more than just what the purpose of their relationship entails. There was a recent flurry of interest in an apparent misjudgment with respect to financing; however, until I have evidence of empircal data detailing that this is a systemic attempt to conspire, then your argument is not very compelling.
You seem to fixate on the fact that franchising is an important facet of this nation's economy, that the government would take significant measures to ensure that the economy remains robust, and that logically this leads one to conclude that they are in cahoots with franchisors to ensure the economy's stimulation. I don't see that this is necessarily a logical conclusion. In fact, I think it is counter-intuitive in some respects. The franchisors can only go as far as their franchisees will take them. This is the truth. In this day, disgruntled franchisees can vent their frustration, truthful or not, and it will have some degree of impact on the franchisor. As this whole internet thing continues to develop, this will only become more, not less, of a reality. A franchisor can only ride the coat-tails of its franchisees so much before it becomes known that the zor is infamous for its encroachment litigation, mandated supply chain issues and other abusive provisions. Assuming that not all franchisors are idiots, there are some that realize the potential PR impact that the internet can have on their future. You can only have so much of UPS/MBE and Quiznos before some will realize that they need to re-do the parameters of their relationship with the zees, to the point that seeking the AAFD or other such organizations becomes a logical solution. There is enough out there that it is not unreasonable to share.
To infer that the government is not aware that franchising has its potential for abuse is not logical. To further assume that the government has weighed the advantages in franchising and consciously decided to favor this result to the point of promoting such abuse is naive. You also assume that the government bears the responsibility to protect individuals from not only themselves but abusive franchisors. You see SEC regulation as the minimum standard for regulation; however consider this, not long ago I essentially wasted $78,000 on stock. I had their circular, considered them a sound investment, and even sought advice from knowledgeable third parties. I consider myself somewhat intelligent, but I am not screaming at the SEC about the inadequacies of disclosure! I was hedging my bets on the success of the MV-22 Osprey program and the supply and logistical chain that would likely be required and it didn't pan out to the extent I desired. The 33 and 34 Act would not have changed my decision or the result, only hindsight did that.
There is no quick solution. Expending resources complaining about the government is exactly that, an expenditure of resources. Divert your attention to what can be changed. Accept that the FTC will likely not have a franchise rule revision in the near future. There is no collusion between franchisors and the government to defraud its constituents. A poor decision on a bad relationship does not a conspiracy make. Yes, again, Item 20 can be ambiguous, but if you see 65% of the system in flux, either due to transfers, non-renewals, cancellations, etc., common sense should tell you that this may be a serious concern!
Complaint Sources
Sources please... And complaints to whom?
It sounds possible. Business opportunities, business concepts without much head office control or branding, certainly have a lot a scammers.
Frankman
Bubba and the SEC The problem is!
But Bubba! The problem is you fail to realize that franchising is not an "investment" of one's discretionary money in the stock market but rather an investment in a job. The great majority of franchise prospects are out there looking for a job and and there are not a lot of good jobs out there and franchising appears to be an answer to their immediate problem even if they have to put their house and savings at risk. The targets of the franchisors are middle class Americans of middle age who can't afford to lose their life savings; their houses, their 401's and their 403's in franchise ventures.
A franchise is advertised as a proven business model and when there is over a 5% to 6% failure rate, this "proven" model is flawed and unviable and when the failure rate is way up there and the network is turned over by one third every three years, this is stealing.
However, because the franchisors have been able to turn and churn and pump and dump out of view of the Congress and the government regulators and the prospective franchisees, this "con" is perpetuated and we have a Quiznos and a TUPSS betrayal of their franchisees and the public trust.
No conspiracy, no collusion -- just public policy and a bad status quo for the victims of franchising.
To compare the loss of losing $78,000 in the stockmarket to the loss of a franchise investment on which the buyer was looking for a job and income to support his family is not fair ----unless you make your living playing the stock market and that was your last $78,000.
The franchisor is almost always protected under the corporate shield and hasn't signed personal guarantees as is routine for franchisees in franchising, who can lose everything because of these personal guarantees.
To suggest that the government shouldn't regulate franchised business opportunities at least as well as securities are regulated is selfish and short sighted. I realize you are telling me that the FTC isn't going to change, and Congress is going to continue this "public policy" and to stop spinning my wheels. However, if the AAFD is not successful in their efforts to clean up franchising, Congress should
step in. (Maybe all the victims will rise from the dead and walk together in protest)
If you don't think that it is disgusting that UPS and Quiznos and IsoldIt etc.. were touted and hyped as top franchise investments by Entrepreneur and they were and are all over the Internet selling franchises based on their top rating in Entrepreneur, you are probably against TRUTH IN ADVERTISING also, and are not a friend of TRUTH IN FRANCHISING.
But you are very intelligent and I wonder where you are coming from, Bubba! I'll take your advice under consideration.
Thank you for telling me that there is no collusion between government and franchisors to defraud its constituents.
ask for More!
Very good points BUBBA.
and FURTHERMORE, the UFOC is a minimum level of disclosure. There are guidelines for what is to be included in the UFOC. There are some state regulators who do not like to see things included which are not 'required' to be included. There are somethings like Earnings Claims which if disclosed must be disclosed correctly.
However there is nothing which says a franchisor can not expand upon Item 20, outside of the UFOC. Why don't you call on GREAT FRANCHISORS to disclose the additional information, even if it is outside of the UFOC.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
2 FTC, FTC Report
Good Morning Frankman. Complaints to FTC.
Here's the most recent FTC report on the topic. You'll need to crunch the numbers just a bit to derive the 1:16 ratio.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
UFOC Disclosure
Information required to be disclosed to the franchisee must be in the UFOC.
In a single document.
Michael Webster PhD LLB
Misleading Advertising Law
Michael, your point?
That has nothing to do with my comment. Which was there is nothing which prevents a franchisor from disclosing more than that which is required by the UFOC, outside of the UFOC.
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Nothing but the Law
Michael Webster PhD LLB
Misleading Advertising Law
Michael????
What????
Believe & Succeed,
Dale
FranSynergy, Inc.
Synergizing Franchising!
www.fransynergy.com
Michael is right...
The only thing a franchisor can dislcose is what is contained in the UFOC, unless they make a supplemental disclosure which would then be part of the UFOC and must comply with any state rules on additional disclosure.
In other words if it is not formally disclosed as part of the UFOC it is improper.