Franchising

There are many states in the US that regulate franchise systems, and the federal government also regulates franchising through the Federal Trade Commission. Many believe that it is important to regulate franchising so that franchise buyers are not fraudulently induced to purchase a franchise, and then end up losing all their money. The Federal Trade Commission and regulations states believe that a franchise is an investment, and like any investment they must be regulated.

This is all well and good however one has to ask who's protecting the franchisers against the Franchise Buying Consumers. As a former franchiser, I was often blown away by the number of franchise applicants who would lie on their team member profiles, or franchise applications. You see, buying a franchise is similar to getting married, and it makes no sense whatsoever to start out such an important relationship with a foundation of lies.

Often, franchisers find out after it's too late and the franchisee has already purchased the franchise that the franchise buyer wasn't exactly upfront with all the details. One of the most common things they would lie about is the amount of money they had to put down on the franchise, and the amount of working capital they had to help their business succeed. As a franchisor this is very important, because undercapitalization is the number one reason for business failure; in a franchise or any business.

Had the franchisee buyer been upfront with this information, the franchiser could have told them "no" they cannot buy the franchise and it would've saved everyone a lot of money, and time. When a franchisee goes out of business, due to lack of initial capital, they often burn territory, and give the franchiser a black eye on their brand name in those communities. No one seems to care about the franchisers, and franchise buyers often lie on their applications.

In going through all the franchise applications that we had, I noted that about 75% of them had falsified information of some type. That's totally unfortunate. So, the reality is there is a lot of fraud going on, on the franchisee buying side, whereas, on the franchisor side there is less than 1%. This is because the franchisor knows that it is essential to be honest and truthful with franchise buyers because you are entering a long-term relationship with them. If not you could be sued down the road.

So someday, I'd sure like to hear the regulators tell me why they don't regulate the franchisee buying public, only the franchiser's side of things. After all, there is so much fraud on franchise applications that it's more common than truthful applications. Please consider all this.