The Franchise Group of the Consumer Division of the Federal Trade Commission is not well known by consumers or the public. Franchises in the United States account for a third of every dollar spent by consumers and 400,000 outlets or stores. The Federal Trade Commission oversees the franchise industry. Some franchisors believe the FTC desperately needs a spin on the franchise division. Some attorneys who make money suing franchisors on behalf of franchisees and sellers like things the way they are and realize that any change would tip the balance and they would lose revenue in a highly litigious and well-paying legal industry.
An attorney we interviewed said in an email, “Well, I respectfully disagree. The franchise has a good and competent friend in the FTC, and particularly with Steve Toporoff, who has primary responsibility for the FTC in this area.” “.
However, the franchising community also knows that while he was at the helm, there were no changes to the FTC Franchise Rule for over 10 years and this caused further hardship for franchisors creating jobs, tax base and economic vitality, that are important to a healthy economy. Now that the FTC has totally screwed up the franchising rules in our country and tilted the field in favor of no franchisors or franchises, not free markets free economies, but for lawyers to make more money due to relentless over regulation; these same lawyers want to export these same ridiculous rules to other countries as well, thus giving our lawyers leverage and opening up new markets for them.
An attorney testified; “I think the FTC, in general, does an excellent job, at least in the area of franchising, which is the only field in which I have any significant experience. Also, the proposed new rule is, again in general, a clear a step forward towards more rational and effective franchise disclosure, and may well serve as a model for other countries’ attempts at rational regulation in this area.
The current disclosure laws, which are mandatory, are a set of more than 200 pages of disclosure documents that are provided to franchise buyers prior to purchase. Each paragraph in the entire required disclosure is open to interpretation of the law and possible judgment. Lawyers call this ‘rational regulation’, I call it a windfall for them. There are few to no franchise complaints in the industry. Even the complaints that do come in are usually not real, but someone trying to get something for nothing. However, most lawyers believe that it is a good system, not perfect, they admit, but a good system. Good for who? Good for them, of course. Many franchisors have made their feelings known, here is an example of some of their comments;
http://www.ftc.gov/os/comments/franrulestaffrpt/OL-100001.pdf
The lack of law changes has helped increase franchise laws over the years, and instead of reducing regulation and paperwork, these new sets of laws are going to increase them. More laws and rules means more laws, of course. A lawyer commented on this thought stating;
“While, in a perfect world, it might have been nice if the process of rewriting the FTC Franchise Rule had moved faster, we have to be realistic and keep in mind that, frankly, franchising is not the highest priority of the FTC, perhaps due to the relatively low number of complaints it receives from franchisees or others, compared to the important role franchises play in the US economy.”
These attorneys are busy flirting with government regulators and often get the inside story, yet if a franchisor calls to criticize or point out flaws in the law, they never get a phone call back and if they can get through, they often They are ‘hung up’ during the conversation when they try to explain their points. Why do lawyers have full access to government regulators, but businessmen who are responsible for everything in the world can’t get through? An attorney who spoke about the FTC stated:
“I remember a conversation I had at a breakfast with one of the FTC commissioners a few years ago where I asked him if he saw any major problems with franchising. After thinking for a few moments, he said no, possible problems related to franchising. the overlapping of regulations by both states and federal”.
Interesting, but if there are no problems with franchises, why don’t we have lower regulations? The same lawyer goes on to say:
“So, to me, the FTC has done a good job of enacting and revising the Franchise Rule over the years, particularly given that there are other areas that they’re much more concerned about, like bus opportunity fraud, consumer financial privacy, the National Do Not Call Registry, Truth in Advertising regulation, oversight of business mergers, etc.”
“We must not allow our focus on franchising to become parochial and forget that our field is only a small part of the bigger picture, at least from the FTC’s point of view and probably from regulators in general. It’s probably a tribute to the relatively good health of franchises that don’t get more regulatory attention than we do!”
Again, the attorney seems to indicate that franchising is a small part of the FTC’s agenda and therefore not to worry, he likes it the way it is. Of course he is, he is making money at the expense of franchisees and franchisors across the United States, why would he want anything to change? America, we need a regulatory reality check and we need it now. Think about it.