Franchising Needs Better Government Regulation
Discussion of legislation and political advocacy regarding franchising.
Ugly reality is hidden in the language of the contract
But 20-year-ZEE, if franchisors will not disclose the odds for success or failure, as is KNOWN to them, they certainly aren't going to talk about the ugly realities of failure. This would be a "Negative" and you know that negatives are not talked about in the sales process. Also, I think you know that most ZEES approach the contract in good faith and don't even think about things going wrong and assume that there ZOR is dealing with them in good faith. A big mistake!
All the attorneys who post on this site indicate that you can't get killer due diligence from a general attorney, and you need a specialist to help you with due diligence on the investment, etc.. and, of course, the due diligence with the specialist is expensive. This, of course, discourages deep due diligence with specialists and many prospective ZEES buy franchises based on the visibility of the brand in their view and in the UFOC and believe that the franchise agreement is a boilerplate contract as disclosed in the UFOC and why should they pay for due diligence if the contract can't be negotiated anyway. They reason and believe that all of the other franchisees in the standing franchise network signed the same agreement with the franchisor and this visibility is translated to viability in the eyes of the potential franchisee. It would be interesting to know how many franchisees will sign franchise agreements in the future without the services of an attorney because of the Internet.
Additionally, the ZORS expertly word and manipulate the wording in the franchise agreements to disguise the hard and mean consequences of failure and this is a kind of constructive fraud in itself that complements the constructive fraud of offering the disclsure document and the contract as a package.
Thank you for sticking to the truth!
Not entirely accurate
Having a franchise registered with the SBA merely means that the SBA has a centralized review process for expedited loan processing for that particular franchise system. Attaching a sinister motive to this is misleading. The SBA neither approves the viability of the franchise system nor does registration provide any real legitimacy to the franchise system. All it does is enable the loan to be processed faster.
The SBA likely has little interaction with regulatory policy for franchising. If you were unable to vet the franchise system, the SBA is not there to do it for you. They fulfill a purpose, nothing more, nothing less.
Thank you, Paul Steinberg, for this excellent article covering the history of franchise regulation. As always, you use this site to educate the readers and your intelligence and insight are evident and appreciated.
Hopefully, the Congress may again address the matter of effective regulation of franchising and this time, perhaps the franchisees will see some success.
Why "bad" Decisions are made Over-and-Over Again
The law has historically used a Rational Actor model for human behavior. Man is largely seen as:
- a utility-maximizing computer with
- full access to all the relevant information and
- negotiating as an economic equal.
In franchising investment decisions, all 3 of these assumptions are incorrect. Should we expect the law, which is based on fictional & faulty assumptions, serve the franchise investor well, in the real world?Cross-Discipline InsightsBehavioral finance, neuroeconomics, economics & law and other fields are increasing showing how overly simplistic the Rational Actor model has become.
For example, 80% of drivers consistently rate themselves above average in their driving skills. Logically, this is an impossibility as only 50% could ever be above the mean. This is an example of overoptimism bias, a widely understood human characteristic that has been largely ignored in franchise investment decision making.
Imperfect Decision-makersHumans process information in a non-logical way. Disclosing more of the same type of information will not work. It hasn't worked, substantially, in the last 40 years.A new type of law is neededI suggest the law should simply support better information sharing [protection of free speech, libel shields, reputation systems, tombstone registration, tying database searches & independent legal advice to SBA loans & VetFran, etc.) to determine the likelihood of a reasonable return on a franchisee's investment.Public law should be passed to authorize private law [industry sanctioned].It is the imbalance of information that is the source of most opportunistic behavior in the first place. Let the investor have the complete picture before they sign up.Who could argue with that?Les Stewart, MBAIndustry Investment AnalystFranchiseFool.com :: the Wise learn to say No
Yes, both the Congress and the Executive Condone
You flatter me and yourself and Blue Mau Mau that we would have any success in bringing down the $l trillion franchise industy, or bringing about any change to the status quo. Do you really believe franchisees could have more votes and more influence with the regulators?
Or, are you suggesting that they could have more influence if they were organized as one body when they approached the Congress and the State Regulators? But, you know that this will never happen because of the nature of franchising that tends to divide franchisees within the networks into different interest groups with different financial prospectives and interests. It is the selfish nature of the human being -- if he is doing well, not to pay fees to protect others who are not doing well and who are victime. It is all about money and, of course, the AFFD can't get $100.00 a year from franchisees across the entire landscape of franchising and the franchisors have the influence and the ear of the regulators because of the money they spend to lobby government.
We know that it takes money to lobby our elected officials and that money talks. We see that there is a revolving door between the Regulators and the Congress and the Corporations that has become a way of life and there are not many franchisees at the "cocktail party" budget meetings in Washington.
I personally don't think there is that much difference between the two political parties where big business is concerned but, of course, the Democrats represent themselves as the party of the people and most of the "People's" legislation has been passed by the Democrats.
I realize that my postings and yours will do little to change the status quo but I think we have to try. There is always the possibility that big media would get interested and pick up a story if they thought it was "product" that would profit them or if their corporate owners were altruistic and thought it would be good for the American people to know the truth about franchising.
You suggest that I write to my Congressmen and Senators, etc.. and that I try to get others to do so. If you people in the Associations can't bring about change, you know that a few letters to Congress from interested citizens are not going to be enough because these letters cannot counter the lobbying influence of big money and big money runs our govenment, to the detriment of middle class Americans who have lost their voice with government.
Individual letters to your representatives that request help with individual problems often receive attention but letters that involve systemic abuses by government are often ignored, in spite of the FOIA. I have been down this road and even tested the integrity of The President's Integrity Committee that got low marks from my point of view.
I have indicated two or three times that I post on Blue Mau Mau to warn new prospects of churning organizations like UPS and Quiznos. I feel I have standing to post my truth because of our painful experience with The UPS Store. Also, hopefully, my comments will be noticed by government who knows the truth or the fallacy of my arguments and will do nothing because they know that sooner or later, I will fade away. Government doesn't like to be criticized and I'm sure they watch the Internet where free speech is abundant and not yet fettered by corporate interests.
Thanks for the comment and for not disputing the truth of my comments.
Australian Activism --The Power of the Press to Confuse
We congratulate the Australian activists who are trying to bring the predatory "secrets" of franchising to the attention of the people and to the government.
We can see how the franchisors in Australia use the same argument that is used in the United States and Canada, where there is regulation, and in other countries where there is no regulation, to confuse the legislatures by suggesting that any regulation of franchising is an attack on SMALL BUSINESS men and women.
Certainly, some franchisors are small business men but! franchisees, because of the binding and exploitive contracts, are merely resources controlled by contract that are used to run the small businesses of the franchisors and to permit them to churn and grow their brand names on the resources of the franchisees.
It appears that so many of the business reporters don't understand the problem and do not help to educate the public. Only public indignation puts pressure on governments to protect the weaker party in franchising, who has generally been tricked into signing a harsh and unfair contract because of the appearance of success of the franchise in the economy and the lack of disclosure of any actual performance statistice concerning the individual unit owners of the franchise.
When franchisors respond to good faith investors who invest their lives and their savings in a franchise, franchisors premeditate bad faith contracts in which they can control and exploit the franchisee in success and acquire the failing franchisees assets in failure.
The evils of churning and turning and pumping and dumping may have to be exposed by a more informed business Press.
No Delight - Bakers Delight!
It would be nice if American Media did some exposing of "churning" and the lives that are ruined by those networks who use the capital and labor of franchisees to over seed their networks.
Churning is not exposed because franchisors don't have to disclose statistics about the failure or success of the first owners to new buyers of their franchises.
Hopefully, Australian legislation will be better than it is here in the States and maybe franchisors will be required to disclose past performance history of the franchises they sell to the public.
I'm sure you read where the Chairman of the AAFD said ten years ago that American Regulation was really about protecting the franchisors from charges of fraudulent inducement and not really about protecting the American franchisee consumers from risk. The franchisors know the failure/success rate of their first owners and should be required to disclose this material information under law but under American regulation, this information can be obscured.
It is good that Australian Media has picked up on these stories and is putting pressure on your government, and maybe Australia will be among the first to require disclosure of success or failure rates of the franchises under law.
I am not against franchising if the true and known-statistical risk, as demonstrated by the success or failure of the investment for ex-franchisees, is disclosed by the franchisor to new buyers of rhe franchise.
I was going to make a post about the actual topic, but since it's already gone the 'government regulation' route, I've decided that I'll pass.
thanks again ranter for taking another topic down the path of 'government regulation' and ruining what might actually an important topic to some on this board..
The Sound of Silence
Like many men who have experienced the trauma of r**e, they said for years they hid their ordeals behind a wall of silence.
Like women who have been r**d, men undergo similar emotions of anger, shame, denial or disbelief. Yet because of the way men are socially conditioned, they have additional reasons for their silence, say r**e counselors.
"Most men are taught that they cannot be victims and do not expect to be victims," said Kay Honey Knapp, the director of the Safer Society, a national r**e prevention center based in Orwell, Vt. "Therefore, they have a deep reluctance to deal with it."
- How Shame and Fear Take a Toll on Men Who Are R**ed, Andi Rierden, The New York Times, July 4, 1993
Why Disclosure Regimes Do Not Work
Paul,If I might draw your attention to Elizabeth Spencer's 2006 article (posted on Blue MauMau Latest Weblinks) called The Efficacy of Disclosure in the Regulation of the Franchise Sector in Australia.Professor Spencer seems to be hinting that disclosure laws are irrelevant because of the nature of franchising itself. I seem to remember the AFA saying something exactly the same.Getting better disclosure laws is as effective as administering better medicine to a dead person. Nice process: outcomes?...the same.Everyone wants Rain but no ThunderOnly the most deeply cynical industry observer would suggest that a disclosure fixation enables and, indeed, positively supports the current dominant stakeholders.Change only happens when power is ripped out of someone else's hands.Les Stewart, MBAIndustry Investment AnalystFranchiseFool.com :: the Wise learn to say No
Item 20 Ranter still can't name even 5 good franchise concepts!
You even go so far as to malign attorneys that are fimly on the side of franchisee advocacy. Dady and Garner and Mr. Purvin are well respected attorneys that represent their clients without reservation or qualification. And while I disagree with them often I do respect them.
The Truth Shall Set You Free!
For franchisees is a sure thing. Unless all franchisees get it together and realize that there is noise and strength in numbers.
Posting is great, but until we gather and realize the power we have against the abuse that is suffered everyday "WHATS THE POINT"
As far as including The Coffee Beanery in this, please don't count R&D out. the fat lady has not sung yet.
Which is a good example of this post, R&D are not yet down for the count.
If by some miracle R&D would prevail, that does nothing for those who choose to give up
Surviving Failure Rates ----Wow! Look at those figures
Wow! This author says that "Three fourths of all businesses fail in the first year. Of the remaining less than half make it through the second year." Can this be true?
If these statistics are correct, why would anyone in their right mind buy a franchise with a ten-year or fifteen-year term? It must be that franchises have no idea of the high failure rate of the franchised business plans that they buy. It must be that the franchisors are counting on surviving the long term contracts through the churning of discounted units of first-generation franchisees who have borne the startup costs.
It would appear that the really smart and informed frasnchisees should buy only highly discounted franchised business in which they will have low investment and risk and nobody should buy a new franchise and build a unit for the franchisor upon which to wear the brand name.
Thanks for putting the article out here!
No one is interested!
You seem to have found the smoking gun and maybe you should contact the FTC to point these very important findings out!
I get it now!. Franchisees are Franchisor's Collateral
Franchisees have to be tricked and sucked into long term contracts because this is the only way the franchisisors can survive and grow their networks and maximize their profits "if three fourths of all businesses fail in the first year. Of the remaining less than half make it through the second year."
Fist owner franchisees are the source of cheap labor and capital to build their physical empires and to perpetuate their brand presence in the communities of the nation,
FRAN-PONZI Scheme of the 20th and 21st Century and underwritten by the FTC.
Coffee Beanery Injustice
Good for Deborah and Richard and Harry Rifkin for their courage in taking on this great injustice that is routine in franchising but not open to public view. Richard and Deborah are just lucky that they have an attorney with the guts to keep pushing this matter. An attorney with principles is a beautiful sight to behold. Against great odds, he is going to take on the status quo and try to expose the injustice and the fraud to the higher courts.
Every year, the corporate interests remove the rights of average Americans to the justice promised under the Constitution. The Coffee Beanery Case illustrates the injustice that is triggered bvy ineffective regulation that licenses the franchisors to sell inferior and unviable franchises to the public as long as they are compliant with the Rule and the UFOC.
One would think that the purpose of Regulation of franchising would be to disclose the risk and to prevent potential franchisees from buying high risk franchises, but apparently the purpose of Regulation of Franchising and the Rule is to protect the franchisors and to permit them to sell their "proven" franchises at any degree of risk to innocent middle class Americans who invest their good faith and their lives and money in franchises. The Coffee Beanery case certainly indicates the truth of this statement.
Let's hope that the 6th Court of Appeals will take a good look at this case. Let's hope that the judicial committees in the Congress and the Senate will do their duty and prevent mandated arbitration clauses in franchise agreements. Why should an arbitrator have more power than a judge? Isn't private justice a tool of those who will exploit at will to maximize profits and to silence their victims.
Maybe this will stop some of the rape of franchisees that has been made possible by ugly and immoral regulatory policy, mandated arbitration, and the constructive fraud of a binding boilerplate contract that appears unnegotiable because of government mandated disclosure of the elements of the boilerplate contract.
The franchise opportunity from hell was followed by the rescission from hell but Harry's only access to the court will be won on his ability to show the court the possible fraud and conflict of interest brought into the arbitration.
Let's hope Richard Solomon, our resident attorney, is wrong and that the higher Court will stand for justice and use their discretion to take a good look at this case. When the law and process is used to design malicious legal traps for innocents, the courts should be concerned and step in.
Thanks to Janet Sparks for telling us on Blue Mau Mau what we would not know if she wasn't doing the job that reporters should do --i.e. protect our freedoms. Let's hope the main media pick up on this story and educate the American people about franchising.
Item 20 Ranter still can't name even 5 good franchise concepts!
He offers nothing new just the same tired old theme once again that Item 20 is the root of all evil in franchising. The Item 20 Ranter hates franchising and franchisors it is that simple.
The Truth Shall Set You Free!
The FTC does not license anyone to do anything. That's for openers.
Within the last year or so there has been practically a revolution in the available quality of professional due diligence.
If franchise investors do not avail themselves of it, whose fault is that?
If you can risk upwards of a half million dollars and don't get competent DD today, you're just plain stupid. I can't correct the past. But I and others like me can damn well make the future better for people with good sense.--
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Increased regulation stymies bullies
Bullies hate frustration. Frustration forces them to change tactics. Abusive franchisors are emboldened by a market whose forces encourage their abusive tactics. Appropo of this week, NE Patriots coach Bill Bellichick is fond of saying: "It is what it is."
When a state passes franchisee protective legislation, franchising flourishes. The most recent case in point is Rhode Island. Franchise penetration is incredible and dozens of new franchises opened after the law was passed. The sky didn't fall and franchisors have done the opposite of rioll up the carpets and leave town. THAT is market driven regulation. Franchisors that want to make money go where the money is and they play fair where the law requires it. If there is no money there, they don't go. That is the only reason they don't franchise.
Franchisees are not Entrepreneurs or Small Business Men
Understand that a franchisee is merely a resource for the Entrepreneur, the franchisor, who proves his plan through trial and error on the flesh of first-owners of the franchise, As long as these assets remain in the system and can be used by second generation franchisees, etc. in the service of earning royalties for the franchisor on the gross sales, the franchisor can beat the odds that four out of five businesses fail in the first five years. It is the franchisors who stimulate and feed the economy in terms of jobs and taxes, etc..
When you consider the malice of these long-term franchise agreements and the malicious trap that is set in contemplation of the failure of the franchisees as predicted by economic experts, it really makes you sick.
If it is really true that four out of five businesses fail within the first five years, the only way franchisors can stand is to get out from under the risk and expense of physical ownership of a franchise and let the franchisee absorb the risk while they churn visibility and maximize their profits.
It is the nature of the beast and franchisees are premeditated sacrifices to a good economy under federal regulatory policy. The truth hurts.
strong federal legislation
The government mandates drunken driving laws, speed limits on our roads and seat belt use on our planes. I submit we are all the better for this slight intrusion on our privacy and added expense.
I (and many others) would like to see something like Representative Howard Coble's (NC) unsuccessful try at some strong federal legislation a few years back as to the z'or / z'ee relationship.
Failing that reality, pure punishment for abusive z'ors would be acceptable.
Coffee Beanery Injustice --Arbitration
Janet! I responded to your article and thank you for this information and for staying on top of this.
Unfortunately, my response to your article was moved to Government Regulation and Political Activism because any criticism of government gets moved there.
Please look in Forum ares Government Regulation and Political Activism Blue Mau Mau for my response to your article. I know that you must get the facts out to the public with the hope that they look at the big picture and will not be offended by my criticism of regulation and our government.
Are these zees deaf, dumb and blind
Do they not know how to read plain english?
Are they not willing to pay for professional assistance.
Are you typing your posts from a secure facility for mentally challenged?
Then! Why are they pretending to regulate ?
I don't understand where you are coming from, Frankman! If government is pretending to regulate, then they should regulate fairly in both the interests of the franchisors and the franchisees.
Instead the UFOC is a license to steal for many franchisors who hide their failure rate from the public.
Isn't your comment just a red herring ----? Stick to the issues.
How do you come up with this? I am impressed.
Blue Maumau will likely promote franchising in a positive way...
BMM discussions will promote more franchising and I believe that BMM exists because of the increasing popularity of franchising.
Prospective franchisees are not going to abandon their pursuits of a franchised businesses because they read posts by Carman the Item 20 Ranter. In fact they may be encouraged to pursue it with more vigor and just maybe perform sufficient due diligence in the process.
Oh and thankfully BMM is a forum for franchisors as well as franchisees and those aligned to franchising.
The Truth Shall Set You Free!
Not quite correct
The FTC does not prohibit false and misleading acts or practices in commerce. The FTC Act prohibits false and misleading acts or practices in commerce. I have a whole docket full of enforcement suggestions if the FTC ever decides that it wants to enforce the FTC Act.
If the FTC did bring enforcement against what the FTC Act prohibits, we wouldn't even need to be here talking about this.
Back when the FTC was an activist agency - in the 1960s, fleecing the ignorant was fraught with enforcement risks for the wrongdoers. I doubt we shall ever see those days again.
What that leave us is that we must protect ourselves. Since there are resources to enable us to do that, the FTC seems to me to be little more than a vestigial remnant of some long passed era. Wallowing in policy and promulgating revised rules that were not enforced anyway do no one any good. We would be better served to revoke the FTC Act and just leave people to fend for themselves - as that is exactly where people are anyway. --
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Yes life is about choices but:
When people purposely lie, steal and cheat who is at fault? It is my understanding misrepresentation is inducing someone to sign when it was a lie. I can think of at least several direct questions I asked. Their answers were out and out lies. Yes life is about choices but it doesn't give the sales rep of the zor or the zor permission to lie to your face. Once you are trapped and you have discovered everything was a lie. S--- hits the fan. We were robbed because so many of their disclosures were nothing but lies. What do we say to franchise sells people? First they painted a pretty picture of the franchise. second I have to assume they are a lier a cheat and a thief. Therefore wait for a year. I have to do killer due diligence which means I have to hire a franchise attorney and talk to my CPA. Plus I need to do due diligence on them and the CEO. Frankly this would be the smarter way to approach buying a franchise. Yet the normal individual who doesn't lie steal and cheat doesn't think like that. I think that way now to protect myself, I am sad to say. They make their money on selling franchises not making them successful. Our country would be a better place to live if these crooks are thrown in prison and there are laws to protect the innocent that are not out to hurt people.
Your tribute to Vonnegut tells us a little bit about you, Les.In all honesty, I have not always understood his humor or appreciated his point of view but he had his moments. I do tend to agree with him that the mainstream press at times "are nonsense". We've seen that in franchising in which the press favors the establishment - franchisor advertisers - at the expense of the real story.Vonnegut reached his height during the 60s and 70s. Students loved his strong counterculture, anti-war viewpoint. I wasn't a hippie. I was one of those short-haired types who was not quite as cynical about the world and the government - but I'm catching up.Anyhow, here's an article on how he loved giving it to the "man" in AlterNet. The NY Times ends with a requiem he wrote (below) from his last book, A Man Without A Country. Fitting.
When the last living thinghas died on account of us,how poetical it would beif Earth could say,in a voice floating upperhapsfrom the floorof the Grand Canyon,
“It is done.”
People did not like it here.
CB Arbitration ---You were robbed
The Private Justice in Arbitration is open to corruption when the Arbitrators have more power than a judge and their decisions are NOT reviewed by the courts. This, as demonstrated in your case, denies the justice citizens are promised in the Constitution. Arbitration goes on out of view of the public and this in itself is not what the framers of the Constitution and our Bill of Rights had in mind.
Your case is a good example of the legal trap that has been set for franchisees who are tricked into buying really bad franchise investments and whose recourse is removed even when there is a Rescission from Hell negotiated by the state.
I congratulate you and your attorney for trying to expose this to the public and to help other franchisees.
I hope Richard Solomon is wrong and that the 6th Court of Appeals will use their discretion to hear this case and take a good look at what happened. I will call my legislators on Monday and every franchise association should call and write the Committee ---but will they?
Purpose of Regulation ---SEC and FTC
The difference is that the FTC, who regulates franchising, has produced a rule and State UFOC's that together with the franchise agreement (the binding contract) makes it almost impossible for franchisees to recover from disclosure fraud.
The franchise agreements, that the prospective franchisees believe are NOT negotiable because of the government UFOC, contain terms and disclaimers that permit the franchisors to defeat fraudulent inducement and "reliance" claims. Even if the court admits evidence of reliance, the franchisee may lose because the franchisor indicates that the franchisee's reliance wasn't justifiable because the terms of the contract that was signed by the franchisee erased reliance on anything said or done outside of the contract and therefore there was no justifiable reliance. (There are discussions on Blue Mau Mau concerning reliance and causation and the high bar to prove fraud on another thread)
The little FTC Acts that provide a private right of action for violations of the UFOC's may just be window dressing that provides incentives for franchisors to cooperate in rescissions and/or to reach settlements with their franchisees. As long as the franchise agreements together with the UFOC's provide almost airtight protection for franchisors to sell "proven" plans that may be proven to work only 20% of the time, franchisees will be sacrificial lambs. Federal arbiters will not deal with fraudulent disclosure to hide risk or flawed and unviable franchises and concern themselves only with the terms of rhe contract signed by both parties, as demonstrated in the Coffee Beanery Case in Maryland.
The original sin is that the UFOC's permit and enable franchisors to sell franchises with very high failure rates of first generation frnchisees that are obscured from the view of new prospective franchisees and the government, as well.
If franchises were regulated as well as securities are regulated by the FTC, the statistics concerning the experience, i.e. the success or failure of first generation franchisees would have to be disclosed under law. Market forces would then prevent franchisors from selling unviable franchises with high failure rates to the public. Prospective franchisees would then be informed of the true risk of the investment. Government would be honoring the principle in contract law of informed consent.
Frankman, Attorneys, Risk, Kroc
Why thanks Bob...I was begining to think I had nothing to say which one could agree with. Last week I'm talking to our legal team at Lanier, Ford, Shaver & Payne and at one point I said, "If I did only what you guys say I should do, I would not even get out of bed in the mornings." To which they quickly snapped, "We've been meaning to discuss this with you, we Do Not recommend that you get out of bed."
To which I reminded them that Ray Kroc once said, "If you're not a risk taker, you should get the hell out of business." and if I get out of business you lose a client....so show me how to make the risk managable!
Believe & Succeed,DaleFranSynergy, Inc.Synergizing Franchising!
It was too late for us. I appreciate you letting me get on here and write about our bad experience. If it saves one person from financial suicide it was worth the time.
Zees and Regulation
DD it is going to take more then just you and me and BMM to get the word out. By the time you enter BMM you are already in the system.
Our case should have been open and shut, instead our State Regulator helped CB more then us. In fact they hurt us. Even though the UFOC warns that the information has not been reviewed and it is up to the zee to review it and then notify your regulator if you suspect that a law has been violated, it proved to be a benefit for CB for us to trust Maryland. CB had inside information from Maryland as to what kind of information we had and that we had not agreed to arbitration. All of this worked against us.
Role of f'zee lawyer
Both of the first 2 statements are not true in the context of representation of small businesses, including most franchisees.The role of an attorney is to attempt to quantify risk factors, their likelihood of occurrence, potential damage, and mitigation strategy. It is the role of the client to apply his or her business judgment and risk-tolerance level to the analysis. Ultimately the decision is up to the business owner. Your attorney is not God, nor is he your Momma: a good attorney does not say "NO" except on rare occasions, such as when a client seeks the attorney's assistance to commit a crime. Indeed, most people with good attorneys will tell you they get frustrated because their attorney will not say "yes" or "no", and that is normally how life goes...shades of grey and options each with their own set of risk and reward.Lawyers have to pay the bills too, and it is easier to keep the client happy than to rain on the client's parade and have the client go down the street to another lawyer who is only too happy to whisper sweet nothings in their ear while collecting a fee. Some have discussed previously on this site the alleged disparity in the quality of legal work between attorneys at large firms (such as usually advise zors) and small firms (such as usually advise zees). I would suggest that much of the distinction in outcome is not so much a function of the quality of the legal advice as it is a function of differences in client reaction to a sober analysis of risk and how that affects the legal counsel given in the first place.As to being a "fish between two cats": I have never seen this situation where the contraparty was a zor. It does occur when one zee is selling to another zee. I have had cases where a zee has (for example) gone ahead with a purchase despite not having a bulk sale clearance or a landlord estoppel. In such cases, I will give the client a Memorandum to sign indicating that the client understands the risk factors and wishes to proceed. Many of those quick to disparage risk-averse lawyers will be just as quick to file a malpractice suit if things turn bad.As a resident of Alabama, FranSynergy might see that prospective zees are rather like Farragut at Ft. Morgan . But Farragut was not reckless; he quickly assessed his options (all of them risky) and took decisive action. Your lawyer should be a trusted advisor. But he is not there to make your decisions for you.
I Agree but AAFD faces political realities
I agree that the AAFD, if it were powerful and wealthy enough, could be an influence for more equal treatment of the franchisees under law and they have already demonstrated their desire to do this through their critique and rating of franchise agreements and other steps as indicated by Robert Purvin. Mr. Purvin certainly did his best to expose fraud in the franchise industry and I'm sure that legislators read now and then when they aren't raising money or going to cocktail parties.
There are the realities, however, of getting that $100 out of all in the huge pool of available franchisees and so many franchisees do not join the AAFD for many reasons.
Those who are on the way don't want to cough up the $100 as they are financially stressed; those who are breaking even and hoping to do better don't see why they should; those who are profiting see no need for change.
Normally, the franchisees form some kind of representative group within the franchise network. This is very dangerous for those franchisees who displease the boss franchisor and sometimes means they are threatened with the loss of their business or humiliating cures, and audits, etc... the strong voices of the franchise associatins are not that strong and are more conciliatory to facilitate negotiation to SAVE their businesses.
Franchisees do not want to sue their franchisor, they want to be successful and protect their brand store in which they have made 100% of the investment. They want to save the day for themselves.
I am new to all of this myself but it has been said on this site, I believe, that the AAFD doesn't support relationship laws in the States and, if this is true, I am beginning to wonder what their rationale is and I guess I am free to write to Mr. Purvin and ask him.
It may be that they do not think that the state relationship statutes will effectively change the status quo. I really don't know. We still get their publication which is very good. I'm not sure we ever joined because we were too busy trying not to fail and we did support the Brown Board and then finally the BSA when we realized that there was no solution other than litigation.
But I know, and you must know, that once public policy has been established and it has been the status quo for such a long time, it is extremely difficult, if almost impossible, to change public policy without some kind of epihnany such as was beautifully expressed in The Franchise Rose Line and The Road Most Traveled Blog.
We have to hope that Les Stewart's Franchise Fool Site will educate the public both here and in Canada as to the "nature" of franchising that permits and legalizes the exploitation of middle class Americans and Canadians to provide capital for development of our economies. I believe that the failure rate of franchising is hidden by agreement in both countries under disclosure laws because they know the rate is high and that it would inhibit investment in the economies if the actual and real rate of failure were visible to the public.
But, I think they are wrong! There would still be investment in franchising if the failure rate were disclosed to the public ---and our government would have clean hands!
There are lots of Dale's out there who stand smug and secure in their knowledge that we will finally get tired and give Blue Mau Mau back to the promoters of the status quo!
Franchise Regulation in the UK Debated in May
Do a Google Search http://publications.parliment.uk ---on 22 May 2007 there was an interesting debate between the Minister for Industry (Margaret Hodge) and others concerning the regulation of franchising in the UK. This apparently was the second debate.
I notice Minister Hodges says that the government cannot possibly insure against business failure but she does appear to say it must be plain that there is no government sanctioning of franchising that could mislead.
Our cousins across the ocean are jusr a search away from us on GOOGLE, the library of the people of the world. Of course, the franchisors are right in there with their great influence and money to try to have their way with the legislators.
We can watch and see if the "money of the global economy" all works together to influence governments to regulate in the interests of money while sacrificing individuals to the perils of ineffective regulation.
I think Margaret Hodge wants to do the right thing both for business and for the individual British Citizen and these debates are for the purpose of discovering the right thing to do.
Wrong again Z-Rube...And Z-Rube stop making things up!
I know first hand that MD, CA and IL regulators will ask for clarification of UFOC submissions and require changes in order to offer franchises in their states. What do you know Z-Rube?
But Failing Franchisees DO Contribute to the Economy
Try to understand that the failing franchisee does contribute to the economy all of the time he is trying to break even, and even afterwards, IF his assets go on to serve the franchisor under new ownership.
Franchisees for the most part are invisible in failure. You are continuing to service the economy when you continue to service the debt you incurred to finance the failed business. Never an ill wind that blows that doesn't blow3 someone some good, or something like that.
Because of the NATURE of the franchise MODEL, often the franchisee is the only one to lose. Ir is the FRANCHISOR's Network of stores, etc.. that feeds the economy and that serves "the greater good" ---that is the rationalization for hiding the risk of the investment from the potential franchisee in the UFOC.
What is happening now is not putting up a fight.
If you think that the fleeced Zees are fighting by doing what they are now doing, you don't understand militancy.
Holding white wine/whine and cheese parties and crying out for fairness is about the same level of militancy as was put up by women when they failed to get the ERA ratified.
Militancy is what the black people did to get the Federal laws enacted that began to permit and even mandate a lessening of discrimination in this country.
I remember seeing on TV what they did for their rights. There is no comparison. --
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
The more people hear about this the laws will change. Look what happened in Australia. The press love Victim stories. Oprah got rich on these type of people going on television as victims. I know people are getting more informed. I get sick just mentioning the word franchisor. (If you are good I apologize.) I will not stop until justice is prevailed. It is wrong to misrepresent material facts. (Lies!!) Sooner or later the lier gets caught.
Your elected officials won't...
...do anything. You're better off travelling to the franchisor's flagship store, finding six homeless people, give them a six-pack of beer each and a sign saying the flagship store uses spider eggs in their bread dough, drop them off at the front of the store to picket, call Channel 4 News with the latest, then sit back and watch the fireworks begin. Rinse and repeat every couple months.
yes I can see how franchising is horrible for franchisees
and the economy.
It is an abomination that so many people have become wealthy from their franchise investments and created so many jobs for others.
Right Troll! The ZEES are the LOSERS --Not Winners!
But it is not just the zors and the lawyers who win. The local, state, and federal governments support regulatory policy that stimulates the economy and new development in the economy. This provides taxes and revenue for government and jobs in the economy.
ZEES provide cheap labor and cheap "venture" capital for the franchisors who have no investment in the physical units that wear their brand name. The government has an interest in holding up the franchisors.
Because it is only the franchisee who loses if the unit goes on to serve the franchisor, the government apparently believes that franchisees can be used to hold up the franchisors who feed the local economies, etc... and government revenues, etc..
The FTC rationalizes that their ineffective regulation is for the "greater good."
When TiF starts to tell the truth - Moved
The discussion thread about government regulation of franchising has been moved here to our forum area.
This area is meant for comments on the article - Quiznos legal counsel. Comments under blogs are meant to (1) engage the writer of the article to expound or (2) to make comments about the narrow topic of the article.
In contrast, the discussion forums are meant to engage the community at large on broad topics.
Mr. Blue MauMauCommunity Moderator
When TiF starts to tell the truth, Item 20 - Moved
This comment about government regulation of franchising has been moved here.
Mr. Blue MauMauCommunity Moderator
Multiple Truths and Multiple Versions of the Truths
We go to the courts and to arbitration in franchising to sort out the truth and he who has the most convincing version of the truth and who has case law or public policy in his corner wins with his version of the truth ---that may not be the truth at all. It may be that often the law is not about the truth but about the law and public policy.
There are, of course, multiple versions of the truth in practice and truth can always be improved on with new facts that support the truth if these new facts can be discovered.
The truth is powerful in that if all of the facts bearing on the truth are uncovered, the truth speaks for itself.
If you don't like my version of the truth, get your version out here TIF.
I am not a failed UPS Franchisee or a failed Quiznos franchisee but I am close to someone who did fail and I enjoy exercising my first amendment rights on Blue Mau Mau.
My mission is to INFORM AND WARN and to make my government better. "Ask not what your country can do for you, ask what you can do for your country."
Throw out the UFOC!!!
Amen to that!! Get rid of the crooks too. Yes lawyer or some representation is a must!!