I agree with your factors: but I would put them in a different order.

1. Political Influence (the Regulator IS Captured because The Congress was captured by the money and influence of those who are regulated)

2. Feigned Incompetence (The FTC Rule is a cleverly designed Red Herring that is intended to obscure the risk of the investment in a franchise. )

3. Bureaucracy (the long chains of command mean that nobody is really watching the store and there is no accountability because nobody is responsible to look at any rules already on the books.)

The UK Minister of Industry decided NOT to “specially” regulate franchising in the UK a few years ago because she didn’t want to mislead the troops returning from the wars. I guess she looked across the water and saw what was going on here in the USA –and NOW, of course, the troops and their families have been made targets of the franchisors because of the pilot progam “The Patriot Express Loan” of the SBA. passed in mid 2007.

Read Nolo’s Ten Good Reasons Not to Buy a Franchise, as published in Forbes Magazine, and also Donald Trump’s (Prof. Parkers comments) site “Seven Disastrous Reasons Not to Buy a Franchise. Then read “Franchising Fraud — The Continuing Need for Reform” published by the American Business Law Journal 01 Jan 2003. —–The truth is out there but is overwhelmed by all of the hype and misinformation about the American Dream and a business of your own that has been “proven.”

The hoax of a franchise being a business of your own and safer than an independent has been disproven.

Read: “Buying a Franchise. The Great Franchise Hoax! A Business of Your Own? in a Google Search, and then realize that the franchisor has been licensed to sell franchises and apparently given immunity to withhold negative statistics concerning the unit performances of what they are selling to the public. This is apparently regulatory policy that is rationalized as serving the greatest good —i.e. in terms of stimulating the economy.

Remember, we are talking about Mom and Pop franchises here and not those owners who may own several units of a franchise system — which somewhat mitigates their risk. I’m sure the passive income rules favor the multiple-unit franchisees of the big brand chain organizations who may also be able to get loans and credit without posting “personal guarantees” for the loans and credit?

Please read “Franchising Fraud, The Continuing Need for Reform” in a Google Search. This article in the American Business Law Journal explains the “inducement:” problem —that leads to the ability of the franchisors to churn franchisees out of view of new buyers of their franchise.

Apparently, the Congress never really looks at the plight of franchisees and plays deaf, dumb and blind to all of the fraud going on. I agree “The bad news is, unless you understand how this works, you won’t know the difference until it is too late!”

You are a good man to take the time to WARN!

Contacting ex-franchisees before you sign the contract may be some help but some of these franchisees have signed confidentiality agreements, etc.. and won’t talk freely to those who contact them. –that is, if you can even find them. Why should new buyers have to contact ex-franchisees and current franchisees? Why does the franchisor, who profits from the sale, have no legal duty to disclose negative unit performance statistics to new buyers under mandated disclosure, the FDD. The FTC says in their guide book that franchisors sometimes pay ex-franchisees for good references –believe it or not?

If you are interested in the law surrounding franchising, you can currently follow the Peaberry Coffee Litigation in the 10th Circuit Court of Appeals. You can read the Amicus Brief submitted by the IFA in a Google Search, and I believe the AAFD will provide an Email Copy of their Amicus Brief in support of the franchisees, upon request.

You can also listen to the Oral Arguments on the website of the 10th Circuit Court of Appeals. Just Google up Oral Arguments Peaberry Coffee Litigation 10th Circuit Court of Appeals and listen to the recording of the Oral Arguments of both sides. I recommend doing this after reading both of the Amicus Briefs.

Grantifying that the courts are open and we can look into how the rule of law is promulgated in the Courts.

Read also in a Google Search, “Making Michigan Safe for Fraud” to understand the problems the Appeals courts face and franchisees face in interpreting contracts that permit the writers of the contracts to protect themselves from fraud with the integration, acknowledgement, and reliance clauses that are part of every franchise contract of sale, the so-called franchise ‘agreement’ —–!!!!! Also read “Contracting out of the UCC — Opting or Copping Out “– in a Google Search.

On a personal note! When I write the check each month to cover some of the debt incurred for startup costs for this franchise that was advertised as an “unprecedented” opportunity for security and profits, I wonder how it is that we will be subsidizing the operations of a multi-billion dollar corporation for many years until we get our house out of hock. The second owner got our store for pennies and maybe he can survive? Churning and advertising will get you everywhere. We, of course, are old will be dead by the time we pay our house off for the second time, and none of this will matter.

http://thegreatfranchisingrobbery.blogspot.com/ Read: “Buying a Franchise. The Great Franchise Hoax! A Business of Your Own? ” and “Disadvantages of Buying a New Franchise” and Franchise Regulation Realities –Deception or Patriotism” in a Google Search.

Those who are complicit in the trickery in the sale of franchises to the public and hiding the “known” risk from the buyers of franchises always want to defend their position by indicating that it is the victims who have failed and that the sheep deserve to be sheared and silenced — for the public good, of course!

Public policy in the past has supported slavery, child labor, strike breaking, and other undemocratic practices, usually for economic reasons, and the courts have endorsed these practices until the conscience of the people brought forth the pressure to change public policy.

If the sheep really understand what is going on and they spread the word, this can bring change because, of course, there are more sheep than lambs involved in franchising.

The Internet and sites like “Unhappy Franchisee” may make it harder to lead the sheep to slaughter and harder for the franchisors and the special interests to lobby the Congress and our Courts for special treatment under the law.

I continue my march!

You see Carol can’t even bring herself to accept that even The UPS Stores has successful franchisees. She will try to convince everyone that the ONLY way you can be successful with The UPS Store is to buy a failing store on the cheap.

It is my belief that Carol has written the same thing so many times she just pastes and recycles her message.

Chris

Anybody who thinks that either didn’t do their homework, have serious mental problems or are idiots. Or all of the above. It’s a business “venture,” and who doesn’t know that starting a business means risk?

There are websites like this one that show what the risks are. Do they visit them? They get lists of franchisees with their phone numbers. Do they call them? There are plenty of franchise attorneys who will review the contracts beforehand. Do they hire them? Only after they go into business and want a do-over.

Carol, you have a couple valid points (repeated over and over and over), but like most liberals offer no feasible solutions. Zero. Zip. Nada. Nothing you propose is gonna happen. So you must just like the sound of your own voice.

You want the wolves to be nicer to the sheep? You want the wolves to give sheep more stacks of papers they won’t understand and are too lazy to read? Great solutions. The only solution is for the sheep to stop being sheep and take responsibility for contracts they sign.

If you are suggesting that Item 20 of the FDD is an effective means of due diligence, why don’t you just indicate this? I’m sure you know that in recessions, prospects invest in franchises because they feel they are proven venture with little risk that will deliver a job and profits, as well. Item 20 is not an efficient or effective means of doing due diligence as has been indicated by attorneys to the FTC in public comments about t he FTC Rule. The flaw in the FTC Rule was pointed out to the Congress in hearings and in many public comments. Item 20 is an artifice that protects the franchisor from making any representations about what he is selling to the public and t his, together, with the integration and reliance clauses in the “invincible” contract of sale, the so-called franchise “agreement”, protects the franchisors for all of the inducements made outside of the contract.

Why should the buyer of a franchise not get full disclosure from the seller of the franchise who profits from the sale from the first day the franchisee opens his business until the last day —even if there is never a dime of profit for the franchisee?

I have never indicated that aLL FRANCHISORS ARE EVIL GREEDY SOBs —I have only indicated that they have the ability to be evil greedy SOBs and commit fraud and torts with immunity under the stacked deck of regulation and the law.