Franchising Needs Better Government Regulation
Discussion of legislation and political advocacy regarding franchising.
Gave the franchisees for Stretch-n-Grow a recision and the right of private action-2 BITES OF THE APPLE. However the story here is that the zor, Stretch-n-Grow violated The Consent Order and now Maryland has issued another Order for the violation that makes Stretch-N-Grow liable for anything that The Maryland Franchise Registration and Disclosure Laws will allow. Why is Dale Cantone sitting on his hands with CB. He turns his head the other way while CB continues to break the law but puts the brakes on this zor.
He is a man with a price tag, if you can pay the price then Maryland is open game for zors.
This zor has not sold any more franchises in Maryland, CB has
The Total investment for a Stretch-n-Grow is $22,000
The total investment for CB is $400,000 - $550,000
Who is causing more damage?
answer DALE CANTONE
Franchise is NOT A BUSINESS OF YOUR OWN
The ZORS use this LIE of a business of your own to enslave you. They really believe and know that "a sucker is born every moment" and that you are there to have your capital and cheap labor sucked up to build the physical units that WEAR a brand name.
Please continue to post Due Diligence and to try to fully understand what happened to you and why! Read 10 Reasons NOT to buy a franchise that was published by Forbes.Com. (a NOLO Article) and understand that you are just leasing a business opportunity in which the franchisor gets to USE you and if you are lucky, you might survive to break even and you might earn a ROI.
I left a message for you on the "Managerial Option" offered by your ZOR on the Forum Government Regulation and Political Activism. Did you read it?
Bull Scat, YES on one thing, but NO on everything else.
First, where's your foundation? What does available due diligence assistance or a government warning have to do with the fact that most buyers choose to heed neither? We are well on our way to total dependence and entitlements, but we haven’t reached the point of “highchairs and forced feeding" … yet.
Second, you provide only a piece of the warning. “TO PROTECT YOU…” is the opening, but why don’t you quote the whole statement. It reads this way:
“To protect you, we've required your franchisor to give you this information. We haven't checked it and don't know if it's correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.
There may also be laws on franchising in your state. Ask your state agencies about them.”
Sounds like a call to do some homework. Doesn’t it read that way to you?
Third, who cares if it turns out to BE “a non-negotiable contract”? No one is twisting the buyer’s arm to buy except the buyer, and the point is NOT whether the deal is non-negotiable, it about the buyer's obligation to “understand” it. Hence, the disclaimer says “if possible, show your contract and this information to an advisor like a lawyer or an accountant”. "If possible" sounds to me like: "Do you know how to Google 'franchise attorney'?"
Fourth, salesmen and advertising are not limited to franchising. “As Seen On TV” is big business, and even the “do not call” order is expiring, so we are easily lulled into the absurd, we need to hurry up and renew our place on the list before we are forced to buy from those telemarketers.
Sorry, but I find no substance in your rant, so I ask you to reconsider.
But, with all of this said (and I’m not going to respond again unless there is a substantive rebuttal), I do agree with you that the “non-disclosure – Item 2” decision is lousy because it reverses a major “disclosure” designed to HELP US in our due diligence process.
I am not a believer in big government at all, but short of this last decision, I think franchise disclosure is good and the present system provides a great basis for decision-making.
Good luck, and sorry if you got burned in the past. You can help others now, if you are so inclined.
Unfair Censorship of Do Diligence and Item 20 Ranter
Mr. Blue Mau Mau permits the comments of Do Diligence to remain in Article Comments and removes my comments to Government Regulation and Political Activism.
It is true that a franchise is NOT A BUSINESS OF YOUR OWN and this is pointed out in the Wikipedia Article for Franchising with citations ---and there is also mention of the Ten Reasons Not to Buy a Franchise with citations.
This is unfair censorship of the thread. Blue Mau Mau exists to promote franchising and to obscure the truth, just like the FTC and the UFOC????
Apparently, Mr. Blue Mau Mau wants someone to respond to Due Diligence with comments that it is his fault and that he contributed to the mess he is in because he didn't do his due diligence.
"To Protect You"
One of the best government jokes is "I'm from the IRS and I'm here to help you." Humor has to have an element of truth in it to be really funny. The truth that makes "To Protect You" funny is that what the FTC does to help you, if not accompanied by really killer due diligence on your part, is worth about as much as the FEMA instructions on how to prepare for a hurricane.
Compare the government's hurricane preparedness directions to Muldoon's
It's always better to know the ugly side going in....
Guest Says:It was only after the failure and the dealing with the hard and mean and dishonest (but legal?) tactics of the ZOR that I started to research franchising. Our ZOR has a famous and well respected brand name and I just couldn't believe that their ugly behavior toward us was part of American Business.
I understand this, because I was a franchisee for many years that never looked at my franchise agreement again after I signed it. It went into a file drawer.
When trouble strikes, the agreement comes out of the drawer and every word is scrutinized by you and probably your lawyer.
The reason I like to write in this space is for future zees. I want them to know what is going to happen GOING IN and not when they have to pull the contract out of the file cabinet and give it to the attorney.
Ugliness in the buisness world is not limited to franchisors. When things go bad, bankers, landlords, and others that you thought were allies can quickly turn in to adversaries.
Once you are no longer a member of the zor's royalty paying group, it has no reason to be nice, and every reason to take advantage of the leverage it has in the agreement.
I agree that it is shocking what the zor can, and will do when this happens.
I just hope that wanna-be franchisees ask what could happen if things go wrong BEFORE they sign on the dotted line.
No Zor will give you a fair shake!
Zors stack the deck against zees. You cannot win even with due diligence since it will not help. You should avoid franchising no matter what. It is the only way to be safe. Save yourself! Zors are out to make money.
That is absolutely correct
The ABA hs no regulatory interest in franchising whatsoever. It's offices are not even interested in advising about franchise investment beyond mere window dressing.
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
ZEES are a Sacrificed Class
Under the corporate-government doctrine of the "greater good" ZEES are a calculated sacrifice to a good economy. From immigrant sacrifices to veteran sacrifices, the greater good will be served and destroyed franchisees, just like old soldiers, will fade away into obscurity.
Paul's historical perspective does not endorse your position
Please don't make Steinberg's post about you.
Bubba Logic on SBA
Thanks for indicating that the "SBA neither approves the viability of the franchise system nor does regiatration provide any real legitimacy to the franchise system."
You make my point for me and we notice the "faint" disclaimer of the SBA. But! you will admit that the franchisors use their SBA Franchise Registry Status in the sales process at the shows and on the Internet to imply that the government is endorsing the franchise.
You will admit that most normally intelligent people believe that their government would not be in the position of guaranteeing loans on franchises with demonstrated high rates of failure.
Fran Data manages the SBA Franchise Registry for the government and sells Snap Shots of franchise systems to the general public, to include consumer franchisees. FranData uses the private SBA Franchise Default List to prepare Risk profiles but FranData, like the State Regulators and the FTC, has deniability concerning the failures of franchises that are obscured in the transfer columns of the UFOC. The FranData snapshots that are sold to the public are misleading, if unintentional, because they identify "terminations" as "cancellations" and they don't mention "transfers" and incorporate "transfers into the total units standing in the systems.
You indicate that "The SBA likely has little interaction with regulatory policy for franchising...." and, of course, the SBA and Fran Data can protect their position, because it is the FTC, and not the SBA, who permjts the franchisors to sell their franchises at any degree of risk to an unsuspecting public.
You can't be so naive, Bubba, that you really believe that the FTC and the SBA policy are not coordinated, and that they "fulfill a purpose, nothing more, nothing less," independent of one another. Do you really believe the SBA Patriot Loan Initiative just dropped out of the sky with no coordination with the Congress and the FTC?
Yes, but franchisee agreements are all very similar in many ways
Guest Says: "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."
I have read many UFOC's in my time (though none in the past year or so), but the language in them is very much the same with regard to what happens if you are in default, or do not pay the francishor what you agree to pay in the contract.
While the wanna-be zee may not have any experience with this language, it is very similar in most franchise contracts. Even a non-franchise specialist attorney should be able to figure out what happens if you fail. Based on this, all zors under your scenario are engaging in this wording.
If a potential franchisee came to me and asked me to review the contract, I could point out very quickly the things the zor would likely do if the zee's business failed. Any lawyer worth his salt should at least be able to detemine THAT part.
Furthermore, if you go to the bookstore, or look on Amazon.com, you will find plenty of books in layman's terms that tell you what to watch out for in signing a franchise agreement.
I do not disagree with you that salespeople in zor offices oversell their concepts to new franchisees, nor do I disagree that the contracts should be written in plain, understandable 5th grade language.
Short of that, though, there is a lot of material out there for a potential franchisee to study, if they only will
And, as I always say, to get the true story - you visit the unhappy zees as well as the happy ones and past ones if you can find them.
Item 20 Ranter still can't name even 5 good franchise concepts!
When will you be honest enough to recommend 5 franchise concepts that are worthy of at least consideration by prospective franchisees and prove you are not a vitriolic anti-franchising fanatic?
The Truth Shall Set You Free!
Have you ever failed at anything? There is no shame in failing- just learning lessons.
So good to again have comment from Les Stewart, MBA, of Franchise Fool.
Les is the only poster who deals with the concept of franchising and its inherent evils that become even more inherently evil when there is an imbalance of information.
His common sense solution, i.e. "let the investor have the complete picture before they sign up" will probably be attacked by the same person who speaks to me or Les about Paul Steinberg's position. I have always understood Paul Steinberg's position and I think his objective comments and his citations on the law, etc.. are always self-explanatory and more for the purpose of educating readers about franchising than arguing his position.
Maybe someone needs a "time out" again!
Lets not chuck the whole model
Les writes that the Rational Actor model is "overly simplistic".I agree, but I would also suggest that:
- The Rational Actor model remains a good starting point.
- What is seemingly "irrational" behavior is often quite rational if you understand the reason for the behavior; that is, for example, what "time-shifted rationality" is all about.
- I do try to point out to prospective zees what biases may be affecting their decision, and let them decide how to factor that in to their franchise purchase.
Les writes: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.This is sometimes true, but in my experience most UFOCs out there today do effectively tell the prospect that once they sign on the dotted line, the f'zor will have control over pretty much every aspect of their business, and can even compete directly with the f'zee. Even the issue of post-relationship obligations (non-competes, "liquidated damages", etc) is disclosed in most of the UFOCs drafted by the competent zor-side law firms.People have the information. They chose to ignore it. That may in fact be a rational choice (that's a whole nother topic), and I do agree with Les that better information sharing is critical. I would add the corollary that the manner of presentation in the UFOC could be improved to better highlight the risk factors--I can count on one hand with 4 fingers to spare the number of f'zee clients I have who actually read their UFOC cover-to-cover; if f'zors can do a snazzy PowerPoint at a sales seminar, that same use of presentation skill can be brought to UFOC drafting, and the law should encourage that.On Les' statement on private law, I am puzzled. For the most part, US law does permit zors & zees to contract around what little franchise legislation exists. Many f'zee advocates assert that the ability to contract around statute is a big reason for overreaching in the first place, so perhaps I am mis-understanding Les.
Action, Not Condoning
Definitely if too many people have the attitude of "nothing can be done compared to the might of almighty business," and keep silent, you're right, our voice counts for nothing. Not only franchisees, but Americans in general (I don't presume to speak for Canadians) are going to be ignored as voiceless. However, we still have a Constitution and we still are a country of elected officials. If they don't know what we think, we can't expect them to do our research for us and then act on that, can we? It would be understandable that our lawmakers think there's not much of a problem, wouldn’t it?
As for the few not making a difference, a recent example is the immigration issue. Just this week the opinions of the American public, gathering steam through TV shows (Lou Dobbs) and Internet sites (started by the few), has been shown to have had a major influence on Congress. Big business does not appear to be getting what it wants in this case.
There are, I'm sure, many other examples. And, for an inspiring example of a mere voice or two righting an institutionalized wrong, see the current movie, Amazing Grace. It shows an historical change, in this case through British parliament, in spite of the very strong opposition of big business. When I saw the movie, the audience clapped at the end. The decision (abolishing slavery in England), I believe, had a big influence on America 50 years or so later, when we were fighting the Civil War. The South might have won had Britain and Europe still had slavery. This is not a Civil War forum, so I won’t go into the reasons.
With the event of the Internet, and communities like Blue MauMau, where people can log on and find out what's happening among franchisees, there's an excellent chance of making a difference.
Franchising has parts that are broken, it’s up to franchisees to spearhead the movement to fix them. This is not something that one can reasonably expect government to take the initiative on without urging on by the people concerned. Sure, a lot of people don’t participate, for one reason or another (too busy working?), but that does’t mean everyone should give up and, especially, it doesn’t mean that nothing can be done.
As Shakespeare so well wrote,
“Thrice is he armed that hath his quarrel just,
And he but naked, though locked up in steel,
Whose conscience with injustice is corrupted"
This Carman charactor must be quite angry at franchising!
This person seems to hijack every thread and convert to a discussion about Item 20 & 19 with an FTC conspiracy.
What franchise did Carman own and what happened and why are we being punished by his ridiculous postings?
Guest writes: "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."
You are buying a $400,000 house, say 30 years ago.
Do you know what your legal fees would have been?
Well, because it has hard to search title, and there was real legal skill involved, your closing costs were 4- 6k.
Now, with title insurance searching title is simple: costs are down to 700-800 dollars.
Franchising is like home buying 30 years ago: there is no good reputation market so the cost of transaction is high.
Michael Webster PhD LLB
Disclosure is important
I have read Professor Spencer's work , and generally am in agreement with her. I would very much doubt, however, that she would say that disclosure laws are irrelevant-- they may not be the be-all-end-all of franchise regulation, but I don't see anywhere that she said they were irrelevant. And besides: if a franchisor tells you that it will be competing with you and that you will have to buy raw material only from a f'zor subsidiary...well, if you go ahead with your franchise purchase (as with the Quizno's folks nowadays) you can hardly complain afterward that the disclosure document was irrelevant---it was most relevant, you just chose not to read it.Rather, Spencer makes the point that in a relational contract, it is impractical for the parties to anticipate every situation which may arise over the course of the relationship. The question then becomes: What, if anything, does society do about that? This Q becomes particularly important where the damage will impact the larger society, as in the case of franchising.There is a "disclosure fixation" and there is a bit of cynicism on the part of the IFA and others in promoting disclosure as a means of avoiding discussion of relationship legislation. But the IFA does have a point: prospects should read their UFOC before they sign the document, and approach this as a business decision. That means if you don't like the UFOC, don't let your emotions get the better of you. Walk away.No one needs to "rip power" out of anyone's hands. The internet is reviving the importance of reputation, and I think that you have even seen some of that effect on this very website.
Noise, yes you are right!
It is simply noise.
The Truth Shall Set You Free!
Don't Harp; Moving Forward Is Therapeutic
Business owners will overwhelmingly fail. But don't get down on yourself. Another great quote:
"The best cure for depression is time and activity. Most of us come out of depression with time. Activity - doing a course, going on a trip, painting the house, anything - helps.
Since men, after failure, usually get more in touch with the feminine or `feeling' side of their nature - the anima, as Jung calls it, it might be a good idea to go in for TM, Reiki or Pranic Healing. Women, on the other hand, tend to tune into the male or animus part of their psyche after a failure. Courses on leadership, assertiveness, sales training, etc would be appropriate and make it easier to come out of depression with a purpose and a plan for the future."
Rational Actors versus Real Prospective Franchisees
The due diligence model is most certainly broken, and the main culprit for franchise laws is a well known cognitive bias, known as the wason effect, after the psychologist Paul Wason.
The empirical evidence that the due diligence model is broken is well known to most franchisee advocates: by the time the prospective franchisee shows up on your door, ostensibly to review the franchise agreement and disclosure document, it is too late for rational discourse over the merits of the purchase or investment.
The prospect is invariably in love with the concept behind the franchise, wooed by an excellent, but deeply flawed sales pitch, and worse doesn't really know what the actual deal he is entering into.
The wason effect , related to confirmation bias, is the key cognitive process any due diligence scheme needs to address.
The problem is this:
a) When presented with an abstract or unfamiliar inference of the form "if p, then q", and asked to confirm the inference, people invariably "test" it by looking for cases in which p and q are both true. The correct logical test is to look for cases in which p is true and q false. Looking for confirming cases tells you nothing about the rule.
b) However, the wason effect is severely curtailed if there is a clear penalty for getting the confirmation test wrong.
Here is an example of the latter. If the rule to be tested is, No Underage Drinking, or if you are drinking, then you must be over 18. People understand that to enforce this rule we need to look for: drinkers but who are under 18.
For example, it is very typical in a business opportunities fraud for the investor to have performed the following "due diligence": check with the local BBB, and possibly order a Dun and Bradstreet Report.
The first step is always commented on with pride by the disappointed investor. "How could I have possibly known more than the BBB?"
The investor has fallen afoul of a complex wason effect. A bad BBB report means that the company in question has reputational problems; but a silent BBB report is not a recommendation of the company. Interestingly, investors refuse to accept at face value what the BBB websites all state: "We don't recommend companies".
The FTC disclosure package for a franchise says "We haven't checked this", ie the equivalent of a silent BBB report.
But the dumb franchisee, having been presented with a confidential disclosure document several weeks before closing, having no clue about how to check the representations, inferences, or rules in the document, looks only for evidence which confirms his initial wrong and incomplete views.
Confirmation bias or the wason effect is deeply ingrained behavior, which if ignored by law makers will result in a due diligence scheme that cannot deliver the necessary market for reputation.
(If this was an academic piece, I would say more about why I think that both Les and Paul are wrong about due diligence and markets for reputation. In short, I don't think that there is any evidence that franchisees have an imbalance of information, and I think that Paul is not sufficiently attentive to the institutional demands of bound rationality.)
"Persuading someone that his judgment turns on a misperception that he cannot see, and that neutral third parties cannot see, will be vastly more difficult than pointing out a logical slip which becomes undeniable once it is pointed out.", Howard Margolis on the Wason Puzzle.
Michael Webster PhD LLB
No one is interested in FTC Progam concerning Franchising
Why is no one interested? It doesn't seem odd to you that the FTC goes to such ends to prohibit misleading statements concerning success or earnings and yet they don't require the franchisors to disclose the KNOWN statisticsl risk of the investment as demonstrated by the failure or success of first-generation franchisees.
This ZOR-Known statistic is the only means of determining the material risk of the investment but the FTC permits ZORS to obscure the failure rate of the original first owners in the transfer columns of the UFOC
It doesn't seem odd to you that this new program of the FTC, the ALE, that is kind of a traffic court for franchisors who fudge in the UFOC's came into being in 2003--and for what purpose? All government programs have a purpose, even if it isn't the stated purpose provided to the public.
Maybe I could write to Janet Sparks and she could find out more about this program. Apparently, the names of the franchisors who go to ALE school are not public information so it isn't like an arrest, or anything.
Too late to contact the FTC because comment period is closed and all of this is in place and I don't want to endanger myself or my family who have already been injured enough by the "system." We have ample proof in recent years that "whistle blowers" are punished by government and we even have legislation to try to stop this punishment of whistle blowers but the legislation is weak because The Congress doesn't want to encourage whisle blowers.
There was a victory for truth today in that AG Gonzales resigned. I don't think he is a bad man but a good Attorney General should be independent and play ball only with the law and not be a team player who works to win for his political team.
Work Hard in the Beginning
What we've read here is that most entrepreneurs will fail. One of the major contributors to their failure is because of they're laziness up front.
Failure is not the only punishment for laziness; there is also the success of others. - Jules Renard
Love at First Site
Not rape. Not by any definition.
The prospective franchisee rushed to bed despite the surgeon general's warnings of the dangers of unprotected sex.
Government Regulation is a Forum Discussion
jd makes a good point. Sorry to break up the party here but postings related to the issue of government regulation will be moved in a few minutes.
Comments under a news story should be about the news story -- in this case, Northern Illinois District Court's ruling on Quiznos. There's a lot of meat in the attachment and in the story to discuss. Besides, we already have a long-standing forum on government regulation, which is meant for debate and discussion on the topic. Some of our posters already know that but choose to ignore protocol and so the whole thread is now being moved.
Mr. Blue MauMauCommunity Umpire
What did the Rhode Island franchise do for franchisees?
The law from my understanding is very similar to the Wisconsin relationship law that has resulted in a hundred or more lawsuits. Furthermore the Rhode Island law may be unconstitional.
I will tell you that franchisors may start charging higher fees in states that cost more to do business in, simply not do business in that state and/or run only company units in those states.
The Truth Shall Set You Free!
Franchisees Are Indeed Entrepreneurs
Some with hidden agendas are trying to demean franchisees. Owners of business franchises most certainly are entrepreneurs. The dictionary tells us it is so.
entrepreneur - noun. someone who organizes a business venture and assumes the risk for it.
Entrepreneurs should be scared of the risks in starting a business. Failure rates are astronomical. So prepare. One has to try.
"Ah, but a man's reach should exceed his grasp - or what's a heaven for?" - Robert Browning
Your comparison to traffic laws is ridiculous...
Okay I get it you want your pound of flesh!
You want to punish "fat cat" franchisors. Well the majority of franchisors are small businesses and you will stifle innovation, development and freedom if you have your way or the Coble way.
We will all (franchisors, franchisees and consumers) pay a price for overreaching government intervention/instrusion.
The Truth Shall Set You Free!
Richard you have to agree that any killer DD is only as good as the Disclosure you have to work with.
THIS IS A BIG PROBLEM
The really bad zors are not disclosing what is required. Or they disclose just enough to get by. They disclose in Item 20 only those that they want you to call.
Those zee's who have left the sysytem that they don't want you talking to, are still being disclosed as up and running.
Guest how do
come up with all this? I'm not impressed.
Carman has Do Diligence's endorsement
What more could Carman ask.
We have discussed why the FTC has not exercised its Section 5 authority, and much as I hate to say it, Mr. Toporoff had a point some years ago when the GAO was doing those reports on the FTC's enforcement activities.
Indeed, if one of the prongs is harm "not reasonably avoided" by the negatively-affected party, then the rise of the Internet and fora such as BlueMauMau would suggest less need for Section 5 enforcement.
Reading- Yes we know how to read. Many people do not know what a franchise lawyer is. Believe it or not. Talked to many zees who didn't know.
As far as due diligence only good zors insist on their zees doing killer due diligence. Buying a franchise involves months of investicating.
The third deserves no comment. It shows what an arse you are.
Dale Cantone and Adminsitrative Action
Is what I'm seeing on all of the the Consent and Show Cause Orders on The Md. AG Web
I have also noticed that R&D are the only ones that had to waive the private right of action.
It was suggested that the feds would reject "two bites of the apple"
That is not true. The FTC has allowed the States that require registration to preempt the FTC Rule.
While there is more then enough blame for what has happened to D&R to go around, the big question is why did Maryland let CB off the hook?
This is not about what the attorney did wrong. That is a different story.
This is about a State Regulator who happens to be the head of NASAA, who caved, for a small unknown like CB
What is going on? Dale Cantone owes answers to a lot of people. Why would someone of his reputation, risk that for CB?
R&D got screwed. Plain and simple. I have been looking at the Maryland AG web for the last week, and sure enough, no other Consent Order asks for the waiver of private rights.
While I agree that it is not the job of the State or Federal government to watch over people who choose to invest in a franchise, the disclosure in all UFOC's encourage people to contact the State and FTC if they find there is a problem. They go on to tell people of the laws and what protection is provided by the different state agencies if a law has been violated.
My point? Don't let your mouth write checks that your butt can't cash. That may be the reason why so many posters are criticial of the government agencies.
It is nothing more then a scam that is bigger then that by the zors, in tricking the public into thinking that someone is really paying attention to what the hell is going on.
So don't be so hard on people who are down on the government for letting them down. They have every right to be furious. Thier tax dollars pay the salaries of those, whose job it is to enforce the law.
There is no need for new regulation in franchising, just new regulators who are not afraid to enforce the law.
>>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. --<<
But the zors would hate that. They like it the way it is, zees lulled into taking a leap of faith because the guvment wouldn't let anyone take advantage of them.
If they knew they were on their own, they might do a lot more due diligence and less agreements would be signed.
One thing I have learned on BMM:
Is when you go into business never never go into it with a 110% attitude that you are going to be successful. Always prepare for the worse. Most fail. So it would be wise to prepare for the worse. No one goes into business to fail. Yet from the beginning I believe we were set up to fail. Why was the build out twice as much? Why was everything more than they said it would be. A perfect bait and switch scenario. They made their money up front. People asked our zor to put things in writing. Their answer was it is against government regulations. Hog Wash!!! Run away from people or zors that will not put anything in writing. They are after your money and never cared about you. When they look at you they see dollar signs. Run away from them and go ahead and call them crooks. That is a red flag and you can just tell them what they are. Stay away from franchises until the laws change. Nothing should be as one sided as the UFOC. It is all about greed. I can't wait to see justice prevail.
how could that possibly be true?
BMM provides in an invaluable service in shedding light upon an industry that has a vested interest in keeping potential investors uninformed or worse yet under the illusion they are informed. I know of what i speak as i am one of PT Barnum's follies.
The only negative outcome of maintaining a site such as BMM as that it attracts vultures such as yourself (as one can only assume given the obvious agenda of your posts despite your best efforts to not reveal where you yourself stand in the industry) to further obfuscate that which is and should be self-evident after browsing this site for five minutes.
yours is an early post for a sunday morning. couldn't sleep last night? i wonder why...
FTC Act, Section 5 ---and Rule Enforcement failure
In looking in from the outrside, the lay person believes that Section 5 of the FTC Act would prevent the practices and constructive fraud that has been legalized under the 1979 FTC Rule governing the disclosure of "essential" information to prospective franchisees upon which ZEES can assess the risk of the investment in a franchised "proven" retail business franchise. Obviously, the FTC themselves aborted the purpose of the rule as stated by the FTC and knowingly permits franchisors to use their SBA Franchise Registry Status and Press Releases to sell unviable products to the public.
Apparently, the confusion or lack of a definite description in the law of the relationship that exists between the franchisor and the franchisee provides the opportunity within the law to treat franchisees differently and less fairly than "consumers' or "employees" or "partners." Franchisees are governed under the law of the unilateral contract that is not bargained and that permits franchisors to devise long-term contracts in which the franchisors have the discretion to deal with their franchisees in bad faith to maximize profits ---and to be excused by the courts because of the terms of the contract.
The courts appear to indicate that their first duty is to faithfully interpret the actual terms of the contract to which both parties have put their signatures, and to cooperate with the regulatory policy established by The Congress and the FTC. The courts overlook the constructive fraud of the FDD and the FA, which, together, induces franchisees to sign the unilateral and exploitive contracts because prospective franchisees believe this is the only way they can enjoy the opportunity for profits and success that have been promised outside of the contract. The courts apparently don't understand that franchisees, on the whole, are not sophisticated business people but rather unsophisticated marks who are more often looking for a means to support themselves in the "new" economy that exists within the "global" economy.
We see the federal policy as manifested in the Coffee Beanery Case in which the State of Maryland demonstrated that they are not interested in the viability of the franchise that is being sold to the public and only interested in whether or not the franchisor is compliant with the State UFOC/FDD disclosure mandates. The Federal Court in Michigan deemed the Maryland Rescission to be only an administrative action and not fraud, even though The Coffee Beanery agreed to the Rescission and the franchisees of the CB in Maryland were destroyed financially in the process of negotiating the rescission. If substantive violations of the Rule and the state FDD's are to be treated only as Administrative Actions by the States, what is the purpose of the anti-fraud statutes passed by the state legislatures? What is the purpose of the Rule, if not to prevent unviable franchises to be sold to unsuspecting prospective franchisees?
Now, our attorneys on Blue Mau Mau are suggesting that Blue Mau Mau can counter the premeditated and ongoing sacrifice of prospective franchisees to the fires of development in the economy. Now, with the event of the new Rule, the constructive fraud will be exaberated by the use of the Internet to sell franchises based upon the appearance of government endorsement of franchises who are invited to list themselves on the SBA Franchise Registry on the basis of the approval of the SBA of their contracts only, and not based upon their disclosures mandated under the Rule or the FDD. Items 19 and 20 of the FDD will continue to be a subsidy of the franchise industry that permits them to obscure the risk of the investments in the franchises they are selling to the public. The "due diligence" excuse that the FTC uses to excuse themselves from Section 5 enforcement of the FTC Act in franchise matters is not defensible and Mr. Toporoff(?) resides comfortably in the pocket of the IFA in the long-standing immoral and unethical status quo of the regulation of franchising.
It is difficult for the naive and inexperienced outsiders (now our Veterans and retired military and their families) who are invited to be entrepreneurs to understand that their government has developed regulatory policy that permits the franchisors to sell their products at any degree of risk to the buyers! It is difficult for the inexperienced target to comprehend that an agency of their government, the SBA, will guarantee loans for franchises that have demonstrated a very high degree of risk for first-owners, i.e. first-generation franchisees.
Richard Solomon and Paul Steinberg talk about the affect that the Internet may have in alerting prospective franchisees to the dangers of the franchise relationship and to the necessity to do deep and killer due diligence on all franchise opportunities. But, in my research on the Internet, I find that most of the "hype" about franchising is undistrubed and not regulated and that those who find the Blue Mau Mau site are just lucky and "few and far in between" in the total picture.
Correction At least as well as "regulated by the SEC"
Last paragraph above corrected to read "as well as securities are regulated by the SEC" -----Sorry about that!
Does Government indicate Contract is Negotiable
Does the FTC or do the State Regulators indicate that the UFOC is not binding in its entirety and that many of the terms of the actual franchise agreement itself can be bargained and are negotiahle?
Yet, Mr. Kroc had to pay $5 million to the McDonald brothers in the early 60's because of his persistent violations of their license agreement.
Perhaps better counsel would have nullified that risk.
Michael Webster PhD LLB
Another absurd rant brought to you by the Item 20 Ranter
The bottom line is that franchise agreements are contracts and before person signs one they should understand it and perform sufficient due diligence in advance.
The Truth shall set you free!
P.S. Franchising is regulated as well as stocks are regulated, however regulation is not the answer, caveat emptor is the answer.
I voted today
For the Fairness Arbitration Rights act. It looks good. It looks like it's going to pass. By the way I never got your message or email.
Thank you for your support. We have no unrealistic view of what will happen with the appeal.
When you have had every Constitutional Right stolen from you, every lttle peice of justice is all you have left. I guess there are not many who understand what it is like to wake up one day and realize that your rights have been stolen, ignored, sold and denied.
If we had one shread of doubt about our belief that we have been sold down the river we would be able to let it go.
We amended the FA to agree that MFRDL would govern the FA. Judge Duggan would not even consider MFRDL, he sent our case to arbitration for the arbitrator to decide. An arbitration contract is like any other contract, and an arbitrator does not get to decide what parts of the contract will be followed.
I sometimes think that there are no more people left who believe that Justice will be served. This appeal is the only thing close to a court room we will see, and at least I will be able to say it made it that far. We will not win this appeal, but in my search for Justice its the only place we have left.
I can't impress upon people enough that the legal system is for sale and only works for those who can afford to pay for it.
Our State Regulator did more harm to us then good. I would not advise anyone to look for any kind of help from the FTC or thier State Regulators. If you think you have a problem with your FA get the best attorney that money can buy.
I had always thought that passing new laws for the FTC Rule and UFOC were just mental masturbation. If the laws that are on the books were enforced there would not be a problem.
Every chance that zees have been given to help them selves has been ignored and that will never bring about change.
Its a shame that people like me and you can't get the word out. Once you know about BMM you are already in the system. Attorneys like Richard S. are not known until you have already bought your franchise. 99% of the people who buy a franchise have an attorney look at the UFOC, they don't realize that the attorney needs to be a FRANCHISE ATTORNEY.
The public has no idea that buying a franchise is a bigger risk then investing on Wall Street
You are not alone! D&R ---NO ARBITRATION FAIRNESS
Why don't you write to Michael Moore who is doing another documentary on Corporate Greed and the Law and Government, I believe.
Maybe this would help the Arbitration Fairness Act to get out of Committee. Who knows! You could try. Paul Bland needs some help to publicize how arbitration is used to deny people their constituional rights.
I think, also, the banks are going to take a better look at franchisors and what they are selling. The banks haven't been doing any due diligence on the franchisor when they let you use your home equity account for a business loan because the collateral of the house protected them, but now, with the sub-prime scandal, I think things are going to be different and the banks will look at both the ZOR and the ZEE very carefully.
Maybe there will be competition for franchisees by those franchisors who are selling the same or a similar concepts and they will have to disclose how successful their first owner franchisees are to new buyers. And, only those franchisors who are successful with their first-owner investors will survive!
We have to keep fighting for justice!
If Grandma was a zee
Today's Wall St Journal has a piece about a 70 year old woman who took out a mortgage she couldn't afford, and when the bank said it would foreclose, she got a lawyer and the bank backed down and said it would refund all the fees.Stories of "predatory" lenders have been in the papers every day recently, and prompted legislators to call for restrictions on lending to "sub-prime" borrowers (of all ages) who are presumed to need the protection of the government to avoid borrowing more than they can afford to pay.An analogy to franchise relationship legislation suggests itself, and I'm curious as to whether contributors to the "Legislation & Political Activism" thread would boot Grammy to the street?
Amen and Goodnight and Farewell to Kurt
Who told it like it is better than almost anybody.
UK Debate on Franchising --May 22, 2007 --Bank due diligence!
In this debate in the UK, Minister Hodges indicates that the banks have a duty of due diligence and it would have to be determined if they were in any way at fault, etc.. for the failure of the franchisees that brought the subject of franchise regulation to the attention of the government by way of elected officials.
Maybe Mr. Blue Mau Mau find both of these debates and critique them for the Blue Mau Mau readership.
We understand in this country that the SBA furnishes the default rate on loans to the banks and lenders to enable them to manage their risk on franchise loans. However, because those units that can be bought under $300,000 are so often financed by home equity loans, etc.. and other savings, the true failure rate of the franchised business plan is not known to the SBA/bank lenders or prospective franchisees.
Do the banks who make home equity loans for business investment have any responsibility for due diligence on behalf of protecting their customers and their stockholders?