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Challenges for Franchise Expo West Debuting in Colorado

Francihse Expo West aisles were empty of buyersTwo weeks following California Governor Jerry Brown's action vetoing two franchise bills, the Franchise Expo West, formerly known as the West Coast Franchise Expo in Anaheim, California, made its debut in Denver, Colorado. The difference in the two locations is that California is a franchise registration state, one of the toughest in the nation in protecting franchise owners, while Colorado is a non-registration state with little regulation for franchisors.

Assembly Bills 2637 and 1782, sponsored by the International Franchise Association, the Coalition of Franchisee Associations and the State Bar of California's Franchise Law Committee were intended to make it easier for franchisors to do business in the state and to sell franchises during expositions. Governor Brown quashed the bills, saying while it is important to promote new business in the Golden State, doing so at the expense of transparency could be detrimental to potential franchisees. And allowing unregistered franchisors to market the franchises that they want to sell at expositions without verifying their eligibility to do business in California is a step in the wrong direction.

Many big name franchisors were present at the October 6 – 8, 2016 Franchise Expo West exhibit hall at Denver's convention center: Jimmy John's, Steak N Shake, AAMCO, 7-Eleven, Midas International, Carl's Jr., Grease Monkey, Zaxby's, Papa Murphy's, Planet Beach, Nathan's Famous, Big O Tires, Sylvan Learning Centers, Jackson Hewitt, Hungry Howie's and Jani-King, to name a few. There were many young concepts as well, such as Sun Valley Certification Clinics for medical marijuana, My Auction Addiction and AVR Van Rental. And there were a few companies, obviously not yet with a proven system, that were testing the waters for prospective buyers. One representative, when asked how long their company had been in business, looked at her watch and answered, "Five hours." They had just received their new shiny food truck and were eager to show it off, all while promoting franchises.

Tom Portesy, president of MFV Expositions, stressed that every exhibitor had to present their company's franchise disclosure document prior to exhibiting. He said each attendee had also been given the event guide for the Franchise Expo West, showing a description on the company, investment range, minimum capital required, date company began franchising, number of franchised outlets, and number of corporate-owned stores. The one thing missing was the date the company was founded.

Under the Federal Trade Commission Rule, a franchisor must, as under state franchise registration laws, prepare and publicize to prospective franchisees a disclosure document containing all material information necessary for them to make informed investment decisions. Unlike registration states, Colorado exhibitors were not required to register their franchise, nor have it approved by the FTC.

Folks line up in droves to attend Beer Fest
Crowds take escalator to Beer Fest

Unfortunately, the franchise expo was competing with our country's largest annual beer festival right next door, the magnitude of it unbeknownst to MFV. While thousands of beer lovers went up the escalator enmass into the facilities of the craft beer event, starting early morning and continuing into the night, attendees only trickled in at the franchise expo. While there were grumbles from the many exhibitors regarding not only the low attendance, but also the trouble getting in and out of the convention center, the lack of hotel rooms, major parking issues, and dealing with some rowdy people from the beer fest, there was at least one franchise exhibitor who seemed to take it all in stride.

Kelli Punchard, franchise and license sale coordinator for Old Chicago Pizza & Taproom, Broomfield, Colorado, not only had a booth at the franchise expo but also two booths at the beer festival next door. The pizza company prides itself in its 100 pizza and Italian food restaurants, none franchised in Colorado, and also promotes its expertise in being the local beer expert. Each of its restaurants offers 110-beer varieties in-house.

Even though attendance was off at Franchise Expo West, Portesy said there were many exhibitors who expressed to him that while there were less people walking through the aisles, roughly half of what they expected, there were good qualified candidates coming through. The franchisors said they believed the validation of ratio of business per lead is going to dramatically increase. "When you think about," Portesy explained, "those who did find their way into the expo had a lot of hurdles to clear just to get there."

One thing missing at the Franchise Expo West was the International Franchise Association's normal presence at the event. While its usual staff were manning its large booth, front and center, CEO Robert Cresanti and chairman Aziz Hashim were no-shows, as was Scott Lehr, EVP of development, marketing and conferences.

California attorney Kevin B. Murphy, who has practiced franchise law in California for the past 34 years and is a former franchisee, does not think less regulation at franchise expos is a good thing. He has been a strong opponent of the recent California bills vetoed by Governor Brown. To put it in perspective, he declared, "It is outrageous that a country like China sets experience requirements before a company can franchise, at least two company-owned in operation for at least a year, plus a management team for support and training, and the U.S., the mother of franchise regulation, has absolutely none."


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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.