Franchising Needs Better Government Regulation
Discussion of legislation and political advocacy regarding franchising.
One of the Scared
In reading your post I'm not sure where I would fit. I have had one of the most horrible experiences one could have in franchising.
As far as Government Regulations, my opinion is that if the laws on the book were enforced there would be no need for new Regulations. I think its a joke.
It dosen't matter what the laws are, if not enforced, whats the point.
I also firmly believe that its the people who have been burnt that are the ones who stand the best chance to change the way franchising is viewed.
The FTC, IFA and DLA,Piper, are a tremdous power. This power can only be challenged by making our prensence known.
There are great articles being printed and reporters who get "The Truth" out there, but that is where it ends.
We have to get our act together and start lobbying and putting pressure on the elected representatives to look into what is going on.
That takes time and I'm afraid that those who have been burnt don't want to invest anymore time.
You can't talk the talk, if you have not walked the walk.
Those who continue to post that Due Dilligence will save you, are right to an extent. However, Due Dilligence is only as good as the information that the zor chooses to disclose.
The only sure thing we will ever have is enforceing the law. This would also deter repeat violations.
We have been able to get almost every Representitive in our State to endorse the upcomming Fairness Arbitration Act bill that will be introduced to Congress, by us, in 3 weeks.
I know that Tinker, also had some Legislation passed in her State.
I will forever contiue to fight with all that I have to try and level the playing field for zees.
This of course will not help my situation, but if I can help to make sure that my present does not become the future of someone I will never meet, then it will be worth the effort
Scarred. So my post was moved to Government Regulations.
However I was responding to your invitation to sit down and talk
Franchisees Can't Fire the CEO
CEO's are hired to ensure the survival of the franchiSOR and to maximize the profits of the franchisors, who are sometimes looking to being acquired by Private Equity investors or to going public!
Only when the franchisees pose a threat to the franchisors goals do they have any influence whatsoever.
The whole power structure of franchising is constructed under binding contract to render franchisees impotent and to keep them separated from each other to prevent any kind of collective bargaining. The franchisee builds and owns and owes debt on the physical network that wears the brand name but the franchisor absolutely controls both the tangible and the intangible assets under the contract to the franchisor's advantage at all times in the long-term contractual relationship.
Richard Solomon has suggested that collective bargaining would be possible if franchisees in troubled networks talked through tough attorneys who guided tough associations and that this should be done from the beginning of the relationship in the network and not late in the game when the damage to the franchisees has been accomplished and franchisees are held hostage at breakeven, as demonstrared in Quiznos and The UPS Store.
Richard further stresses ALWAYS that NEGATIVE investigation up front is the best way to approach franchising and that it is always best not to buy into a bad situation no matter how pretty it may look on the outside.
Still think his $1,000 negative due diligence consult is the best deal in town. Why deal with a consultant or a broker who will have a conflict of interest and if you do, don't you have to do your due diligence on the Consultant and the Broker, etc,? That's why Richard's deal is the best around. Also, there have been a lot of sorry franchisees who took contracts to general attorneys who are not qualified to vet or to know or understand the risk involved and who will read the contract for a few hundred dollars and further confuse the franchisees.
You have to remember that the consultant and the broker or the seller is protected by the UFOC and the franchise agreement from any misrepresentations made in the sales process. An attorney, however, will give you what you pay for. If you are looking for negatives about a franchise you are convinced is the answer to your life problems, you will get NEGATIVES if there are negatives to be found from Richard Solomon, Paul Steinberg, or Michael Webster, all fine attorneys who post on Blue Mau Mau.
But, Richard Solomon is the only attorney who has priced his negative assessment and this is the genius of his offer. His long experience and background in franchising gives him special instincts that he brings to negative investigation of franchise offerings. He has been very generous to the franchisee community in FranWhacking bad franchisors as a Blue Mau Mau community service. I don't know Mr. Solomon and only know him through his postings on Blue Mau Mau and his many tutorials that I have found on Google that have been so helpful to me in my quest to learn the truth about the DEAl made between the FTC and the IFA that is demonstrated in the UFOC's that serve to protect frnchisors from accusations of fraudulent disclosure.
Bakers Delight wants to censor free speech on Internet
The franchisor community across the world has been able to use Press Releases and Internet Hype to sell dogs and pigs to an unsuspecting public with the permission of governments.
Since government-corporate alliances haven't YET been able to permit the highest bidders to control the Internet and prevent free speech, franchisors like BL have to use any means they can find to silent the voices of those they have cheated. It is because they can always sell franchises out the front door while selling discounted franchises out the back door, or stealing the assets, that they survive and grow to pay taxes to government and to provide job numbers for government PR.
Perhaps, when franchisees fully understand that franchising has become so DURABLE because it is a means of capturing cheap labor and capital for the franchisor who can grow on the flesh of franchisees who are canibalized and silenced in the failujre and loss of all they have, government will stand up to eliominate exploitive practices and outright thievery as is practiced today in farnchising.
But, remember Deanne! Always, when there is talk of Recession, franchising grows, and government will not do ANYTHING that prevents stimulation of the economy. Remember! In all the time that franchisees are struggling to get to break even, they are feeding the economy, and even in failure, generally, their assets continue to feed and stimulate the economy.
Unfortunately, all across the free World, governments have forgotten that their constituents have to have jobs and a means of making a living ---but the "global economy" has changed the game for the multi-national Corporations who are only interested in the maximization of profits. Governments depend on "franchising" to make the job numbers look better and they turn a blind eye to the practices and rationalize that "the end justifies the means."
Maybe we will have a COBS ROBS website in the US and Canada ----if the Australian voices are silenced. Good Luck to you, cousin!
If it’s BULL SCAT, please explain why
Actually, (and I’m not gearing up to fight someone else’s battle, but) Solomon has cast out, for free, the best pearls and treatise on “prospective and existing franchisee self-defense/attack strategies” that you'll find. In fact, his defense warning #1 should be on every label affixed to cans of disclosure document soup. Namely, “It’s you, Jack, who’ll be running the business, and because of that, you ought to get yourself into the mental driver’s seat before you spend your money; this isn’t a passive investment.” That is a huge chunk of beef because most of us (innocent and well seasoned alike) tend to see the FTC and SEC in the same line of work. They’re not.
Now, if I’ve misinterpreted your statement, Guest, or if you were directing “bull scat” to another issue, then sorry about that. But, if you are actually saying that the advice is lousy, I'd like to see you back it up.
ABA Forum on Franchising
If 85% of the attendees at this annual event are attorneys who work for franchisors, we can be sure that they are there to protect the franchisors and to ensure that their "market" will not be adversely affected by any changes in the law that would interfer with the "status quo" and government regulatory policy that protects the franchisors.
The ABA works in its own interests and the interests of the franchisors and the ABA and the government regulators are essentially the same. Not even the ABA will deny that they are in the pocket of "big business" - and the IFA - and big business in franchising is now a global affair.
The ABA does have some token representation from the franchisee side who are permitted to speak for the franchisees ---but, of course, talk is cheap and for ten years there has been no change in regulatory policy and no changes in the law to benefit franchisees who, under the law, are premeditated sacrifices to the franchisor systems.
But, I imagine the food and drink is good and everybody enjoys seeing each other and the status quo remains protected for the special interests. As long as franchisors are 100% protected from presale misinformation and outright lies by adhesory contracts that inexperienced "marks" believe they have to sign, because of the government UFOC's or the FDD's, to get the promised rewards, it will be business as usual and the consumer franchisees in good faith will continue to play with a deck of cards that is stacked against them.
The sharks will continue to eat the little fish with immunity and impunity under our laws and the ABA will prepare for next year's Forum on franchising. This is all in keeping with the ugly and immoral regulatory policy established by the FTC and upheld by the ABA.
I think Shakespeare had it right! And, of course, it is the "business" lawyers and the most "political" of the attorneys who make it to the bench in our nation
Kemp Coady thinks $28,000,000 was lost by families in Sona
Again, I congratulate Kemp Coady on his posting and his courage in relating how so many wealthy and educated professionals were cheated by the SonaMedSpa franchisor. It is not just the little fish who lose $300,000 to $500,000, but also those more sophisticated and experienced consumers who are taken in by the appearance of government endorsement of franchising and the image of the IFA.
In reading his comments again, I see that he agrees that franchising needs to be regulated as well as securities are regulated by the SEC. He points out that this would stop some of the fraud that now exists in franchising.
I imagine Kemp Coady is shocked, as I am, that SonaMedSpa is on the SBA Franchise Registry and eligible for SBA guaranteed loans. This indicates to me, of course, that it is FTC policy to encourage the sale of franchises at any degree of risk and, therefore, the SBA loan policy and FranData, who administers the SBA Registry for the government, cooperate to implement regulatory policy.
Would Mr. Coady agree?
Franchise regulation overview
The webmaster set up this portion of the board for discussion of Legislative and Political issues; these are topics which seem to be spilling into unrelated forums and article discussions. To help out, I would put out a brief overview of current regulation. I do so from a US perspective, and invite others to bring to this Forum their respective nation's perspective.
Franchise legislation per se does not appear until around 50 years ago, but it is rooted in a shift in American jurisprudence dating back around the turn of the last century.In the aftermath of the Civil War, expansion of the railroads and urban manufacturing led to a shift in US law. There were quite a number of injuries and deaths caused by the new economy, coupled with concern over the ability of powerful individuals and corporations to affect the economy. This led to the development of such things as antitrust laws, labor laws, and other examples of remedial and propylactic regulation which are relevant to a discussion of modern franchise law, and the legal framework within which the franchise industry operates.As discussed previously , the early 1900's saw the development of a more urban society which necessarily freed opportunistic actors from the constraints of pre-industrial societies where everyone knew each other and where social pressure made reputational risk a serious factor pressuring people (and companies) to behave. People change gradually, and so even today much behavior that served us well is not compatible with modern law and economics; this has been referred to as "time-shifted rationality " and is closely related to such concepts as "heuristics" (our internal paradigm for quickly processing complex information; the science behind your 'gut reaction') "bounded rationality" (which says that human heuristics limit the "rational economic actor" model which underlies much modern American law) and "kin selection" as a formerly adaptive behavior now exploited by modern franchise salespeople.(I know, some are starting to snooze...but this is common sense and it really does give a solid framework for an analysis of the merits and demerits of franchise regulation.)To some extent, one can see in the Quizno's and Cuppy's / Java Jo'z cases that the wheel has come about full circle. For many years, franchisors were not concerned about reputational damage, because in our mobile modern society, there was always a new (often immigrant) franchisee who had not heard of the f'zors reputation. The very idea of the Internet as a "community" is part of what has enabled f'zees to begin to make reputational damage a constraint on abusive f'zors.Automobile sales was one of the first areas in which franchising was used. Auto dealers tended to be upper income and influential members of their communities, and so when the franchisors got aggressive, the auto dealers were able to get the first federal franchise legislation passed in 1956. That law remains on the books today, and it is worth reading the law's definition of 'good faith' .Three years later, franchisors led by Dunkin' Donuts founder Rosenberg formed the IFA in Chicago (it subsequently moved to D.C.) and despite significant abuses in the franchise industry, f'zors were successful in forestalling federal legislation until the Franchise Rule took effect in 1979 (plain-language overview of Rule here ). The notable exception was petroleum franchisors: those of you old enough to remember the 70's know how unpopular Big Oil was, and in 1978 the Congress passed legislation protecting gas station franchisees .Most states do not have franchise-specific legislation, although they may have law of more general applicability and if you have a complaint you can contact your state regulator ; however you should be aware that most regulators regard franchise contracts as being between sophisticated business parties and although the same office normally regulates complaints about other investments such as stocks, the law is quite more protective in the latter case than for f'zees.In the 1960's the negative media attention caused many prospects to not buy a franchise, and many f'zees of the 70's and 80's were immigrants; this is especially true in segments such as roadside hotels and QSRs. By the 90's, the franchise industry began to look to retirees, laid-off middle-management, and in recent years to young people and to persons leaving the military. Although the LaFalce and Coble-Conyers legislation failed to pass Congress in the 1990's, as the franchise industry becomes a more central part of the economy there has been concern as to negative externalities caused by the industry: at root, franchising is a method of purchasing capital and labor. As early as the 1990's, analogies were being drawn to regulation of labor and capital markets, and those analogies have continued to be made. That, and the increasing number of franchisees who are middle-class voters, has led to recent interest in regulation of the franchise industry at the state level .
Is ALL Growth "good" Growth?
The most common cited economic measure is GDP (Gross Domestic Product).Many of the BMM posters seem to believe the following: all growth is good. Period. End of story.Some of us disagree with this approach because the GDP calculator has no subtraction button.
Take crime, for example.Most people consider crime to be a bad thing and an even worse thing when it increases. Not the GDP data processors. When crime goes up, that's good news for the security and self-defense industries. And it adds to the GDP.
Divorce? I think there's general consensus that divorce, in most cases, is a bad thing - except for divorce lawyers and Realtors. Divorce brings in the bucks for the legal services and housing markets, which adds to the GDP. You get the picture.Doctors have a word for unlimited malignant growth. It's called cancer.
Therefore: If crime, divorce and cancer increases, the GDP goes up.In franchising, personal life savings re-distributed into a corporate treasury (even when there is very, very little intrinsic value in the transfer vehicle) is counted as a gain, simply because economists haven't learned to subtract. Article quoted: The Prophet Motive, Cape Cod Times, April 2002.
Your newly created inability to support your retirement is unrecognized but nevertheless very real.
More on Condones
" . . . one has to assume that government knows what it is doing."
You know that old saying about the word assume. Are you talking about the Canadian government or the American government?
In either case, if you are convinced there's an abuse that needs to be righted, write your government representatives and point out the problem. Make a concrete proposal that makes sense and try to rally others to the rightness of your cause. Right now, statements like the one above are not particularly helpful. Pointing out that something is broken that needs to be fixed is. Feeling that your representatives are in cahoots with big business and that we are impotent is not going to get us far. Big business bands together. So can franchisees. And guess who has more votes?
Are you trying to bring down the $1 trillion franchise industry or do you genuinely want to help franchisees?
"Souped Up" and NOW "In the Soup"
Franchise Pundit warned but they lined up to try to "prove" this unproven concept.
It is almost impossible for the naive and inexperienced "entrepreneur" to overcome the hype and PR, and the appearance that a franchise is a proven turn-key operation, and that only morons fail.
Prospective franchisees don't realize that franchisors are happy to take your money when their concept might have an unknown failure rate of first-generation franchisees trying to prove their "proven" plan. Franchisors can only afford to try to prove their franchised business opportunities because they are using other people's venture capital and cheap (unregulated) labor. If they used their own capital and paid for labor, they could only grow slowly as the business chain proved itself. Franchising invites overseeding with untested seeds, some of which may germinate and some of which may not. Failed franchisees are expendable and considered "bad seeds."
Prospective buyers don't understand that a concept may be proven to work only 50%, 60%, 70% of the time more or less (short term-long term) and that the real success and failure rate, the odds for a new investor, is obscured from view and the "proven" concept can continue to be sold until there is an implosion and the franchisor fails or until the franchisor stands with profits.
Yeganeh lose yer money!
Kurt Vonnegut died yesterday
I had forgotten how many times I read his books in high school and how they had shocked me into the semblance of thought. A great, great American original passed away yesterday.
Still and all, why bother? Here's my answer. Many people need desperately to receive this message:
I feel and think much as you do, care about many of the things you care about, although most people do not care about them. You are not alone.
Government regulations is an oxymoron
Government won't get around to regulating franchise practices until after it regulates the even bigger scam called flu shots.
The same moron mentality that buys these new franchises that sell to newbies one store at a time regularly gets flu shots.
Every year the flu shots are for a strain of flu that isn't here this year. So they make next year's batch to deal with this year's flu strain. Next year there will be another strain of flu that the relevant batch won't deal with either.
Pharmaceuticals are thought to be highly regulated. The FDA is "owned" by the so called "ethical" pharmaceutical industry. The use the same technique as the franchisor community.
There is an absolute parallel between the morons who take flu shots and the morons who buy these crooked franchises. They are the same people. If I were to seek a target demographic for the sale of a bozo franchise offering, I would get the list of fools who take flu shots and sell it to them, laughing all the way to the bloody bank.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Bakers Delight Lies and Maybe Cobb's robs!
Thank you Deanne de Leeuw for your posting which will serve as a warning to those in Canada and the United States. You used the "C" word that often gets blogs tagged as spam on Blue Mau Mau. This is a problem in the UK as well and the UK recently decided not to govern franchising because they didn't want to be in the position of lulling British citizens into a false sense of security like the US Government has done with its SBA Franchise Registry and the FTC Rule and the UFOC's.
I read about your horrible experience with Bakers Delight and am happy that you did get some attention from your legislature and an impassioned plea from the floor for investigation of Bakers Delight. Remember, however, that franchisors in the global economy have a strong lobby with governments and prevent any effective regulation because they tell governments that franchising can't stand up to any actual disclosure of the true risk involved in the purchase of the franchises. The franchisors know and could easily and inexpensively disclose the success or failure rate of past first-owners to new prospective first owners of franchises but they are allowed to obscure the true rates under current laws.
The self-serving contracts that franchisees believe are standard and uniform under the law, and that franchisees believe are NOT negotiable protect the franchisors in the courts. Franchisees are brought to sign these contracts because they believe that they are not negotiable. Franchisees sign these contracts based upon the visibility of a franchisor like Bakers Delight and believe that the franchisor intends to deal with them in good faith because they are making a good faith investment and taking all of the risk. They have no idea that "bad faith" is calculated in the terms of the contract agreement and that these terms concerning termination and lease defaults are a premeditation of the acquisition of your business in fire sales.
It may be that governments turn a blind eye to what is going on in franchising and justify the sacrifice of franchisees to the stimulation of the local economies. Did the millions that you lost stimulate the Australian economy? Did anyone lose but you?
You can see that under American Regulation and Canadian Regulation, Cobbs will now be operating in the United States and Canada under UFOC's that will permit them to sell their franchises at almost any degree of risk to new prospects who may lose all that they have while Cobbs is trying to grow their networks.
I know as you investigate franchising that you will realize that this is a world-wide, somewhat new method of gathering operating capital in which corporate franchisors can maximize their profits while transferring the risk of the so-called proven venture to the franchisees. Because the franchisors do not share in the losses of their franchisee's businesses, and because they can acquire these businesses at fire sales, they often grow their networks disproportionately on the backs of innocent first-owners who lose everything. Those who lose everything are silenced in failure and in the courts and the franchnisors know this and count on this great inbalance in power to continue their ugly practices.
If franchisors were required to disclose the success or failure rate of the "proven" franchises that they are selling to the public, at least this ugly practice of churning would be exposed to the public and it would be difficult for abusive franchisors to sell their products to innocents.
Please keep us posted. We lost a great deal of money in a The UPS Store Franchise and they use the same practices as Bakers Delight and the franchisor is part of a huge and highly respected American Corporation, i.e. UPS who decided to buy and use a franchisor to maximize their corporate profits. Quiznos is another big American franchisor who did damage both here and in Australia but who has operated with immunity under our laws, but out of business in Australia. We have had suicides in this country but our Press has little interest in them and the IFA has the greater influence with the Press and the Media and the Acamdemic Researchers who produce research that continues to protect the franchisors at the expense of sacrificed franchisees. The franchisee voices are weak and you can be proud that you are noticed in your country and have had good media attention.
It is good that we can talk to each other. Maybe the Internet, that the Corporations are working to take over, will help franchisees but you realize that even Blue Mau Mau works to serve the franchisors and doesn't want to irritate the government or the franchisors or consultants, brokers, and attorneys who want to sell on Blue Mau Mau. You understand that there has been no effective regulation of franchising anyplace in the world because apparently the International franchisors have convinced governments that franchising is only durable as a business model because the true risk doesn't have to be disclosed to the buyer of the franchise, and because contract law protects franchisors in the courts, and because franchisors are permitted to "C" with immunity and impunity under the law.
Interesting that statistics of industry or sector
I find it interesting that under the proposed new business opportunity rule, the FTC will not allow the use of industry statistics. unless the statistics are representative of the opportunity.
But, will the FTC make franchisors disclose the actual ZOR-known statistics regarding the success or failure of first-generation owners who provide the capital and labor to build the new units that wear the brand name.
Will the FTC be taking comments on this new business opportunity rule?
How come nobody on Blue Mau Mau wants to talk about
the Alternative Law Enforcement Program of the FTC and the difference between a technical flaw where the ZOr (or his attorney) goes to school, and a fraudulent flaw in the UFOC that misrepresents the contract. It would be interesting to have some examples of "technical" oversights that would be eligible for "school" and oversights that constitute fraud under State laws.
ABA parties and screws down franchisees in legal crucifixion !
Looks like an opportunity to party and share NEW ideas on screwing down franchisees and protecting franchisors 150%. The ABA earns my disrespect more every day.
Topics in the Forum like "RESTORING THE STATUS QUO ANTI-RESCISSION AND RESTITUTION IN FRANCHISING" will further work to ensure that franchisors can continue to sell high-risk franchises to the public with the approval of government and with SBA guarantees. They must be looking at the Maryland Coffee Beanery Case and this injustice that was sealed in mandated arbitration and that has provided some "show boating" in a Congressional hearing on mandated arbitration .
Not only does the government, the FTC and the SBA, subsidize the franchise industry, they subsidize the member firms of the ABA. Everybody gets fat and happy except the franchisees who are misled by the Rule and the UFOC's into buying high risk franchises that look visible and safe to them because of the government UFOC. In good faith, franchisees sign the unconscionable franchise agreement that they think is unnegotiable and which protects the franchisors 100% from charges of fraudulent inducement to contract. The Contract terms are such that it is very difficult for a franchisor to breach the terms and very easy for franchisees to breach the terms. The legal trap has been set and few franchisees excape or understand the long-term implications.
Pretty disgusting! and all the big name law firms will be there and only a few names of those who are supposed to be more friendly to the franchisee, like Michael Dady and Robert Purvin. Are Michael Dady and Robert Purvin the "token" representatives of franchisees who are permitted to have "token" power in the industry to provide the appearance that franchisees have a chance?
As Richard Solomon warns ---don't be a DUMBass ---DON'T SIGN that franchise agreement without a negative consult with Richard Solomon. This is really the only hope a franchisee has ---i.e. to get expert killer due diligence before putting his/her signature to a long-term contract that can kill a franchisee financially and emotionally. NOTHING for the GOOD has happened for franchisees with the new Rule. All of Robert Purvin's suggestions in l997 to the FTC has been ignored because it is the WILL of the FTC and the ABA to stand up the franchisors ---no matter at what expense to the franchisees who are just considered food for the fires of development.
LET THE BUYER BEWARE! The Silence of the Lambs will continue and franchisees will be calculated sacrifices to seeding the fires of franchising. Franchisees will continue to invest in high-risk franchises who have demonstrated a high rate of failure of their first generation franchisees who provide the capital and the cheap labor to build the franchisor's network and profits.
No research and no statistics are made available to franchnisees on the past and present performance of franchises and no statistics are available on how many franchisees survive the long-term contracts that act as a means for franchisors to acquire the assets of franchisees in fire sales to keep their networks standing and looking visible and viable.
Franchising needs to be regulated as well as securities are regulated by the FTC but we can see that the IFA, The FTC, the SBA and the ABA will work to see that that doesn't happen. The IFA has stated that most of our Representatives in Congress are so ignorant that they don't kmow the difference between a franchisee and a franchisor and franchisees have nobody to lobby the Congress for them.
We can thank the ABA for helping the Corporatios to help themselves to maximize their profits on the backs of the franchisees who are silenced by the system and the ugly status quo of undemocratic public policy that ineffectively and dishonestly regulates franchising in the interests of the franchisors and NOT in the interests of the franchisees. The stated purpose of the FTC Rule was aborted from the beginning and franchisees should not be told that their government is protecting them, when, in fact, their government is assisting the franchisors in setting a legal trap from which few can escape when push comes to shove and the franchisee is failing.
If franchising were regulated at least as well as securities are regulated, the franchisor-known material risk factor as demonstrated by the success or failure of ex- first-generation owners of their franchisees would be disclosed under law and not obscured in the UFOC's through the artifice of Item 20. the
As I was watching the baseball game last night freezing my a** off, it made me wonder why in the hell does major league baseball start their season so early? i guess it's because it generates more revenue for itself and it's teams, while making the fans in the stand miserable.
Oh, wait, i just realized that this was an article of Quizno's, and I'm way off-topic. Oh well, I'll go ahead and post it anyways, since there are plenty of other off-topic comments on this page.
Franchise Rule Changes no Help for Franchisees
In reading the 133 page Franchise Rule notice of changes, we see that this is nothing more than protection of the status quo and Item 20 deal that continues to permit the hiding of the failure or success of first-generation owners in the Transfer columns of Item 20. The only kind of churning recognized by the FTC is that in which the franchisor reacquires a unit and resells it. The FTC must know that many networks use and encourage third parties to acquire their failing stores in squeezed fire-sale- asset- purchase agreements to avoid disclosing these stores as terminations or failures.
The broker changes and the Inrernet and electronic rules will mean that it is "open season" on franchisees who will continue to believe that the government UFOC's are intended to give them information on which they can access the risk of the investment.
The Rule and the UFOC's continue to act as a red herring to divert the attention of the buyer of a franchise from the material risk of the purchase as demonstrated by the success or the failure or previous owner operators of the franchise. This information is known to the franchisors and franchisors should be required to disclose this information under the law to accomplish the purpose of the Rule as stated by the FTC.
The FTC and the IFA continue their betrayal of franchisees with ineffective regulation that permits networks to stand up and grow their visibility disproportionately on the backs of their failed first-generation franchisees.
Competent due diligence to avoid fraud!
Good article, Richard. But, you write this knowing, yourself, and knowing that the government knows, that franchisee prospects, themselves, cannot and do not perform competent due diligence with the information required to be disclosed to the franchisee under law. While they should immediately hire a competent and killer due diligence attorney before they even think about signing contracts and leases, experience teaches us that prospective franchisees are not doing this. Doesn't it? Experience teaches us that the appearance of government protection and endorsement and the VISIBILITY of the brand lulls prospects into a false sense of security Even the Minister of Industry of The United Kingdom knows this.
Even if the franchisee were to talk to every current and ex-franchisee reference that is provided in the disclosure document, this means nothing regardless of what is said by the references. The only value of Item 20 references are that they "might" prevent a prospect from signing the agreement. But, the reality is that ex-franchisees can and are silenced and that current franchisees and ex-franchisees have no legal dutry to vouch for the franchisor. Item 20 is an artifice and it is the franchisor who should clearly disclose the material P&L statistics and success and failure rates of the individual units who compose their networks to those new prospective franchisees.
It is obvious that once the franchise agreement is signed, franchisors are home free and franchisees will never be made whole because even when there are ommissions (fraud) in the UFOC that indicate that the "risk" has been hidden and the franchisee has been damaged by hiding the risk (Consider the Coffee Beanery) the damages can be found to be proximate to the failure of the franchisee to discover the risk in the due diligence process and/ or to the misrepresentations of the franchisees referenced in Item 20, and not to any misrepresentations made by the franchisor concerning "risk" --- whether or not the franchisor is in compliance with disclosure law.
I am not an attorney but the "construtive fraud" of "disclosure" and the "airtight adhesive franchise agreement" may be "legal" but it is certainly immoral and unethical regulatory policy that the courts uphold under the premise that the signed contract and the sanctity of the terms protect bad faith practices by franchisors who knowingly sell franchises with a high risk of failure of first-generation franchise investors to the public ----because they can under the regulatory policy of the FTC and SBA guidelines. .
Apparently, it is never fraud for a franchisor to sell a franchise at any degree of risk under FTC regulatory policy and SBA rules. But, what, then, is the purpose of FTC oversight and the Rule? What constitutes a bad franchisor who should be kept out of the market?
Do you, Richard, believe that it is good fiscal policy for the FTC to license franchisors to sell franchises at any demonstrated degree of risk and for the SBA to guarantee loans on franchises at any degree of risk? If franchisors were required to disclose the success statistics of their invididual units, would this disclosure result in competition between franchisors of the same or similar concepts? Would such competition work to serve the public, to include franchisees, because those franchisors with bad performance statistics of first owners would find it hard to compete with those who could advertise good performance statistics for their first owners?
I agree that the only solution is DUE DILIGENCE but since we can't clone you and Paul Steinberg and Michael Webster and Robert Purvin and since the government only warns that they haven't read the disclosure document, which is "cover" for the franchisor, anyway! are you satisfied that the sacrifice of tens of thousands of franchisees who won't do killer due diligence on defective disclosure works to serve the greater good for the public? or the Franchisors and the ABA and the FTC and the SBA?
Tricked by the lies and appearances out of contract!
Tricked by the promises and appearances out of contract that are all disclaimed when franchisees are brought to sign the malicious, unbargained, boilerplate contract that they believe cannot be changed or bargained because of the mandated government disclosure circular.
Tricked because franchisors don't disclose the KNOWN statistics concerning the success or failure of their first-owner franchisees to new owners. Tricked because franchisors don't have to disclose past or present unit performance statistics under disclosure laws.
Tricked because franchisees are human and believe that they have to sign the contract to access the profits and success promised outside of contract by the franchisor.
Tricked! because franchising is a gamble on which the House will not disclose the odds!
Tricked into indenture or failure and sometimes success, all of which feeds the franchisor who has tricked you into taking all of the risk while he takes your profits as royalties.
Tricked and Ufoc--ed good by Q and its friend, the FTC.
PURPOSE of Blue Mau Mau
Richard's purpose is to WARN and ADVISE that you have only the one chance to protect yourself -----and that is BEFORE you sign a franchise agreement.
I wonder, however, how much influence Blue Mau Mau can have when the industry as a whole is using the Internet and Business Media to recruit directly from the Internet. The FTC and the SBA appear to allow the franchisors to use their SBA Registry Status to imply government endorsement of franchises that appear on the SBA Registry. The SBA, through FranData, advises that you can get ON the Registry even before you complete your FDD because they read and approve the Contract, i.e. the franchise agreement, to determine eligibility for SBA Franchise Registry status. (This makes sense because the SBA is not interested in the success or failure rate of the franchisees and apparently doesn't track Item 20 failures)
The FTC prohibits false advertising and advertisements on the Internet but doesn't prohibit the use of the PRESS RELEASE as a means of advertising franchises as long as the franchisors DON'T talk statistically about the success rate or failure rate of the franchises they are selling to the public. The new FTC Rule appears to premeditate the use of the Internet to sell franchises and has declared OPEN SEASON on prospective franchisees. Unfortunately, prospects do believe what they see in Print and especially in Press Releases that are picked up in the local media. (Apparently, Entrepreneur offers a special PR Service to their franchisors)
It appears to me that Blue Mau Mau and Richard Solomon will have only small influence in preventing the great wave of investment in high-risk and unviable franchises that will continue to be sold to the public over the Internet.
The constructive fraud of the combination of the FDD and the boiler-plate franchise contract will continue to protect the franchisors against charges of fraudulent inducement, and the franchisees will continue to be sacrifices to the economy under FTC regulatory policy.
Unfortunately, Richard Solomon's influence and Blue Mau Mau's influence will be just a drop in the bucket and those franchisors who recruit from the Internet and who use Entrepreneur and other Business Media ( such media who get their financial support from the franchisors) will continue to rule the day.
Blue Mau Mau is perhaps "token" representation of those "few" franchisees who have gotten to Blue Mau Mau too late to be saved and too late to warn and save others. But, we are thankful to Blue Mau Mau for its policy of allowing free expression to franchisees and ex-franchisees.
Lawyers Want No Risk
"Most Attorney's are all about mitigating risk. Attorney's have less risk by saying NO, than by saying 'It looks good to me'.... " - FranSynergy
How true this is. No lawyer was ever fired for saying, "you may want to reconsider doing this."
An entrepreneur between two lawyers is like a fish between two cats.
If we unite into a Pan-Franchise Association we can break the franchisor domination over the US and the world.
Under Franarchists Manifesto we can:
1. punish franchisors by witholding royalties and ad fund payments
2. sell unapproved products to prevent global warning
3. market carbon neutrality
4. over pay our under-paid workers
6. buy only organic ingredients
6. provide free food and services to the homeless
7. elect Dennis Kucinich president
Join me at www.franarchist.org
Blue MauMau's Mission
Regarding the remark posted beneath this post, there is no need to guess on the purpose of Blue MauMau. It has been spelled out:
"Blue MauMau unleashes social media tools to inform franchise investors." - Blue MauMau's Mission Statement
Our readers are involved in an act of creation - whether it be a first time single unit investor or a seasoned multi-unit investor. Stopping someone from making a bad investment or discussing regulatory weaknesses is important but ultimately unsatisfactory. Know what I mean?
Let me explain. Years ago the founder and CEO of my publishing group wanted me to look into starting a new high-tech trade journal. He and I believed in due-diligence. After considerable research, I whacked the idea he had in mind. After explaining why it was a bad idea, he thanked me but he looked very dissatisfied. The founder of the company had a dream to go into high-tech. Fortunate for me, I valued my career so I had an alternative business opportunity for me to launch and lead.
Warning is important. But franchise investors want to know where to invest, not just where the investment is bad or where government is failing to serve them.
Zee's are employees of the zor if
They can be terminated. Why don't they just tell the zee's it isn't their own business. Where is the justice in all of this? They use the zee's money to build their business and brand. Yet legally can get terminated the minute they speak out if they smell a rat. Completely one sided just like the UFOC.
Re: United They . . .
As you know, just because an attempt fails, you don’t give up. Not if the goal is worthwhile to you. Big business fails in their efforts too. Look at the bankruptcy law that was passed two years ago. Bill Clinton vetoed it, I believe several times, while he was in office. Anything-for-big-business Bush was elected and voila! Bush signed the first time it was put on his desk. Now the credit card companies, who were the backers, are raking in more dough than ever, at the expense of lots of their customers, including families with serious medical problems.
You’ve already seen blogs or articles on Blue MauMau showing pro-franchisee state legislation. Seems pretty encouraging to me. From what you tell me, there’s no reason to feel that the situation is hopeless.
Obviously, concerted action is much more effective than individual voices here and there. But those individual voices, in large numbers, have a good chance of getting lawmakers’ serious attention. Franchisors are not more important than franchisees, who are in business too.
In this day of the Internet, it’s easier than ever to find like-minded individuals and take effective action. If you read Time’s Man of the Year (You!) story a few months ago, you know that this kind of opportunity on the Internet is less than two years old. If somebody else is willing to devote their time and efforts, and if you just do the minimum, which is communicate with your legislators when the call to action goes out, you too can have the satisfaction of seeing an improvement, maybe a big improvement.
What do you think of the AAFD? I don’t know much about them (I’m just in the beginning stages of looking into franchising). Do you? From looking at their website, (www.aafd.org), it looks like a great opportunity for a franchisee (or maybe even a wannabe franchisee) to work for improvements.
What makes you think the regulators read the UFOC's
What makes you think the Regulators read the UFOC's? They are just a license for the franchisor to do business in the State and not much more. The States want the jobs and the business and the revenue in taxes, etc.. from the ZORS and the ZEES and they only look at the UFOC's when there are complaints that the laws of the State have been broken.
If people have a fair trial in court!
Since people don't understand the legal aspects of many contracts- and I understand many of the zee's in our franchise had lawyers review their UFOC's and got bad advice. We did. As far as due diligence I know of many that did a good job of dd. They still signed. dd does not work for the average person. (Let me remind you that zee's are not average people they are hard industrous working people.) The zors have their lawyers working over time to make sure they are covered in all areas. This Fairness Arbitration Act would let the zee's go into court and tell them their stories. Many lies will be revealed. Let me remind you that the zee's all over the country have very similar stories if not the same. If thousands of people had similar stories it is obvious who is misrepresenting here. Zor's are afraid the jury would be on the zee's side because they are afraid their lies would catch up with them. It is my understanding that in contract law if there is any misrepresentation, puffing, or disclosures not disclosed that would affect a person's decision to sign terminates the contract. In our case all we have to do is reverse their disclosures to us then we would get the truth. People have a right to speak out especially when they have been swindled. UFO is one sided and Due Dilegence doesn't always work because what if you are the first wave of a zee. There is little or nothing out there to work with. They tell you it is your business- the truth it isn't. They tell you we want you to succeed- truth is they don't want you to succeed. If you do they will figure a way to make you not succeed by putting a store next to yours to get you to go out of business. They said our market is the baby boomers- the truth their market is the baby boomers. Their in the market of selling franchises and not seeing you succeed. Just turn around their lies and you will get the truth. It would only be fair to go before a jury and tell all our sad stories. Arbitration we will always loose. That is why the zors are agaisnt this new law. Bad zors better clean up their act. There are so many angry zees out there. The public is getting informed and the word is getting out do not trust zors. Our only hope is this new law will pass. When they say we will waive our rights to a court case it should be a red flag that they are lying. There would not be any reason to put that there in the UFOC unless they have something to hide.
True ---Due Diligence doesn't work for Average Consumer
IFA will work against Arbitration Fairness Act because the whole system is set up to get franchisee from the sales process to the signing process and then it is all over for the ZEE.
Fraudulent Inducement to Contract is NEVER arbitrated and never makes it to the courts. The FTC and the SBA apparently support the selling of franchises to the public at any degree of risk to the buyer.
When ZORS own only Paper Networks and own none of the physical Network, they have to own the ZEE lock, stock, and barrel through the terms of the binding contract that is upheld by our courts.
The UFOC paves the way to all of this ---At least you are now seeing this!
As Richard Solomon says ---an ounce of prevention is the only cure because the "pound" of cure doesn't even exist for ZEES who can't afford to fight back.
They only think of puchasing a franchise
as a bad business choice. The truth is it is more than that. The laws give the Zor the right to lie steal and ruin this country's responsible citizen. We were not poor before this. We should have the right to bring the stories of countless zee's who have been robbed and hurt to court. They ruin us we will not be able to contribute to the nation's economy because we will not be able to buy anything. Our creditors know this because we have always had great credit until we bought a franchise. I always bought whatever we needed when we needed to. When people are ruined financially we cannot do anything but pay off the debts that contribute to the wealth zors empirel. The middle class is dissappearing.
DAGWOOD's - No FTC Enforcement
The FTC is Blind and they must just pull "enforcements" chances out of a big bag to only get around to investigating 6% of the complaints. Their cup is always out there and the IFA is always ready to fill it. I remember that Lance of Car Wash Fame says they have "selective enforcement" at the FTC just to make themselves look good ---to look like they is some oversight of franchising by the government.
Just give up
That is what Richard would have all of you do. Just give up.
After all a zee does not stand a chance right?
Well if give up you will remain what you are. A VICTIM
I refuse to be a victim for anyone. I refuse to be fleeced without yelling BLOODY MURDER while the fleecing takes place.
You better believe that the IFA has taken to heart that zees are becoming more and more outraged by what is going on.
Keep screaming and make sure you get to your State Representitives and scream at them while you're at it.
Make sure this time someone hears you. Change takes place with money for those who have to pay for it.
Change also happens when the mases get together and refuse to be silenced by money and power. There are more of us then there are the people with the money. You are the one who votes for these people make sure they are working for you.
As long as people continue to become beaten down because the fight might be tough, then you will never be heard.
Any thing worth having also comes at a price
Franchisee Termination Options
Conduct by the franchisor that ammounts to termination?
When ZORS sell you an unviable franchise and you complain about it and then they threaten you with termination and audit you and generally make your life miserable, you have few options.
When you can no longer bear the monthly negative cash flow and decide it is time to quit, and you notify them that you have to terminate, they want to get your assets for nothing and are hoping, if they want your business, that you will default and they can send someone to the bank to make as small offer for the tangible assets and then they will take over your store and leave you with the debt, and threaten you with liquidated damages if you won't cooperate in the takeover of your business.
If they can't get your store this way, they will send a third party, who will offer to buy your assets, to deal with your Landlord and if you try to terminate because of your great losses, the coterminus lease default term in the contract gives the third party agent of the ZOR the ACES in dealing with the Landlord when the Landlord UNDERSTANDS that the ZOR is NOT going to assume the Lease. Both the Landlord and the ZOR comes down on the ZEE and he is willing to give his assets away for nothing to get out from under the personal guarantee on the lease ---and the ZOR can threaten the ZEE with liquidated damages unless he cooperates with the agent new ZEE in a managerial relationship, etc.. until the new ZEE is granted a franchise ---if he wants the store. In the meantime, the failed ZEE remains responsible for the lease and all of his personal guarantees.
They disguise this management practice in the language of the UFOC from new buyers of the Franchise and from Landlords, as well, I assume. Why would any Landlord agree to co=terminus default terms if he knew that the ZOR never assumes the lease and that his third-party agent can't and won't assume the lease until he has a franchise agreement in hand. The Landlord, therefore, has to cooperate with the ZOR and the agent of the ZOR because he, of course, wants a tennant.
Most ZEES do not understand that this practice in termination is not disclosed and that the terms regarding termination are misleading and confusing by intention. When you notify a franchisor that you are terminating because of losses, etc... and you try to cooperate with de-idenification, etc.. of the brand,etc.. and continue to pay on the lease with the hope that you may be able to sell your assets to someone who can use them (because you can't because of the non-compete) they still want to control your store and threaten to tear it to pieces in the de-identification process because you have "abandoned" the business and it is THEIRS, and you owe them liquidated damages according to the contract.
Under the terms of these exploitive franchise agreements, you are dedicating your assets to the Franchisor and these assets are THEIRS one way or the other if you fail. This is not clearly disclosed and should be under the law, in my opinion. These bad faith practices apparently are legal under contract law.
Terrible News ----More Regulatory Betrayal of Franchisees
How terrible that the IFA has influenced yet another State regulatory regime.
This is really bad news and more indication of how the regulators in this nation betray the people that they regulate to maximize profits for the special interests.
When government gets around to fixing the regulations in the financial markets, maybe they will have to look at franchising, where the unviability of units in franchise networks can be obscured from the investors in the franchise and the stockholders who invest in the franchisors? This can't be good and responsible fiscal policy.
The vision of short term profits and policies with no view as to the long-term consequences to the country and to the American people has done great harm to our country.
Why are you so bitter?
You are on a jihad against franchising. You have no objectivity whatsoever. What is your problem?
Quizno's is a poor economic model for franchise investment and I would recommed folks avoid it. However you damn all all of franchising with your rhetoric and will not admit that franchisees often fail because they are poor businesspeople and operators. You cannot even bring yourself to say that franchisees cheat franchisors by under reporting royalties, are not compliant with their obligations and are a detriment and risk to their fellow franchisees.
Regarding dealing one on one with franchisees what is wrong with it? The relationship is franchisee to franchisor.
My act is clean brother...it is you that needs a good scrubbing!
There are not multiple truths! There is only the truth. What you post are your unsubstaniated opinions based on your faulty assumptions and limited experience as a failed UPS Store franchisee.
What are your thoughts on how to balance damaging the brand further, impacting the existing franchisees, as against providing adequate due diligence for prospective franchisees?
How do you know when you overstepped that balance?
Michael Webster PhD LLBFranchise News
Either make lawyering mandatory for
both spouses or throw out the UFOC.
Les Stewart MBA
Wow Item 20 Ranter
I was afraid you might be a Republican, but I understand now that I have no worries with that possibility. Not that I would have wanted you to leave the party, its a big tent, but I would simply have had a hard time reconciling it in my mind. Although I do suggest you join the Democrats.
The Truth Shall Set You Free!
THE WORD YOU SPREAD CRAPOLA
You'are not spreading the word, you are spreading crapola.
If you were serious about helping existing and future franchisees you'd conduct yourself in a different light. You'd have meaningful dialogue. You'd be able to register here at Bluemaumau.
You have simply failed in business. You are simply unable to accept personal responsibility for your failure. You need someone to blame! The cause of your failure, YOUR CAUSTIC ATTITUDE!
And the one who dies is the zee!
More I learn the more I get angry. The zor and lawyers benefit. And the zee dies financially. The only hope is the zees will fight and stand up. In the mean time the zee is forced to go back to a job. After all those years of building themselves up financially only to be robbed of bad zors. Then work a meanial job. All I hear is the UFOC and dd. The only protection is not to sign.
Private right of action
Bubba we have in Maryland a private right of action in our Franchise Law. However, our private right of action was considered to be this forced arbitration which took place in Michigan.
Hey prolific guest it's time to answer Truth's question
"It is tiring to have you ask, answer and conclude in all of your posts what you believe to be evil about franchising especially since you've stated you have no direct experience in franchising or on other occasions you have led people to believe you failed at owning UPS Store. Which is it?
Your theories on franchisng are bankrupt and specious.
The UFocking Relationship ---Beguiling Heresy by Paul Steinberg
I recommend the Penn State Law Review, Beguiling Heresy, Regulating the Franchise Relationship, by Paul Steinberg as well as the essays of Richard Solomon of Franchise Remedies, as well as Michael Websters WebSite, for study of the franchise relationship on a more grownup level.
Learning ---and Retrospect about Due Diligence
We can be hopeful that sites like Blue Mau Mau will get the word out and that franchising will become "clean" in the future when the past and present performance statistics of the original individual unit owners are required to be disclosed under law to new buyers. But, the franchisors will fight against this and the FTC will not fight the franchisors.
Franchising has grown in our economy since the government regulated franchising in the late 70's because, of course, it is the trust that the franchisee has in government who has not required the franchisor to DISCLOSE the known risk of the investment that induces the franchisee to sign the "take it or leave it" contract of adhesion.
Forty years ago they were writing about "fraud" in the industry and franchising is increasingly a greater part of our national economy and fraud is increasing as well. If the FTC only investigates 6% of the complaints and runs a rehab school for franchisors and continues to ineffectively regulate franchising, franchisees will continue to be premeditated sacrifices ---logs on the fires of development in the economy.
It is because the government does not require the franchisor to disclose the risk to the new buyer of the franchise as indicated by the success/failure of first-owners of the franchise that it is possible for franchisors to perpetuate their networks on the backs of the original investors in the franchise. The original buyer bears the costs of build-out and startup and, often, in failure his assets and his debt that he is still servicing goes on to ensure that the second generation franchisee, who got the business for almost nothing, survives to feed the franchisor and perpetuate the visibility of the network.
Piper Rudnick was respected, as well as Marbury & Wolfe. DLA is one big sausage factory, of which franchise practice is just one of many sources of revenue.
Those who influence the writing of the Regulation ---DLA Piper
It is so obvious that lobbying and the lobbyists have taken over our government and the law as well and that the American people are stupid marks.
Our children, who are the product of better times and who have lived in better times are educated by the special interests through public education to trust government and to believe that we are a government "of the people, for the people, and by the people" and to believe in the "rule of law" that will protect the people.
One of the teenagers in our big family said that one of his teachers said that the Jews were persecuted because they charged high interest on money and the Christians couldn't charge interest because it was against their religion. ====I couldn't believe this but I didn't want to start something on the front deck and I just told him, I didn't think that his teacher was right or that this was true, and let it go.
It is hard to know the good guys and the bad guys these days and the corporations own most of media and we get it from both the left and the right and we only get the truth from people like Ralph Nader and Ross Perot who know that only a third party that works for the good of the people of this country can save Americans from the great threat of Global Capitalism and the greedy multi-national Corporations who intend to maximize their profits in the global economy by exploiting the masses.
Government can regulate to protect corporate profits and can NOT regulate to protect corporate profits. The CELL PHONE industry is self regulated and does its own safety research. Our children as young as ten (and they are working on eight-year-olds) have cell phones in their ears many hours of the day, seven daya a week. If brain cancer becomes epidemic in 20 years or so, will they blame it on faulty research? Will the settlement of these suits that claim that brain cancer was caused by the constant use of cell phones contribute to the premature death of many of our beloved children. Will the profits over those 20 years justify the premature deaths?
Re: The Dwyer Group Named Among Best Companies to Work for in Te
they maybe one of he best places to work for but its all at the expense of he franchisees. its unfortunate that their success does not reflect to the franchises they sell. Their franchise failure rate is phenomenal and they make sure that information does not get out.
Risks and Rewards better explained in New FTC Rule ?
I'm not sure the Lead to this article concerning the Rule in the Chicago Tribune really tells the truth. I'm almost sure that the new Rule doesn't require the franchisors to better explain the risks and rewards. What does Blue Mau Mau think?
I don't think the Rule does that much for franchisees at all but it is all in your point of view.
While those in franchising and those who surround franchising know that the Rule and the UFOC's are just part of the sales process in franchising, the public and prospective franchisees really believes that government is trying to help them to make an educated purchase of a franchise by requiring the franchisors to disclose all pertinent information that will help them access the risk and the rewards of buying the franchise.
Apparently, this is not true and the government knows that this is not true and I think they should do a better job of explaining to franchisees that the Disclosure Process is just a part of the sales process and that the UFOC does not reveal all of the risks involved ----to include the failure rate of the business plan they are selling to the public.
This was a carefully devised article for the purpose of both pushing franchising and warning of the risks. The Illionois Attorney General appears to be trying to help franchisees by exposing "churning" and this is certainly a step in the right direction.
Churning is possible, of course, out of view of the public and the government because the failure rate of the business plan can be hidden in Item 20 of the UFOC.
Maybe other states will follow the lead of the Illinois Attorney General and "churning" will not be obscured from the view of prospective franchisees.
I still believe that the invasion of the privacy of selected franchisees to act as references is a poor replacement for statistics regarding the failure rate of the franchised business plan.
Government should regulate franchised business plans at least as closely as securities are regulated.