To Beth!
You are a good sister and a good human being. Hopefully, you will think about the how and why of all that happened to your sister and you will try to educate your friends as to the dangers of franchising and the failure of the public policy that permits franchisors to misrepresent the success of what they are selling to the public. Under "public policy" franchisors are not responsible for their representations made during the sales process and can disclaim all of their promises and representations in the actual boilerplate contract signed by both parties. Franchisors are allowed to hype success outside of the contract and NOT to DISCLOSE the risk as known to them and as long as they are in compliance with the FTC Rule and State FDD, they are protected from any recourse for concealment of material facts in the sale of the franchise, or from claims of fraudulent inducment to contract by misrepresenting the success of the franchise.
Under public policy and the provisions of the FTC Rule that governs regulation, franchisors are protected from Truth in Advertising laws, etc.. when the prospective franchisee is brought to sign the adhesory franchise agreement (the contract from hell) that contains the acknowledgement and integration clauses that are routine in franchise contracts.
This is Public Policy protected by the status quo and will only change when more prospective franchisees and failed franchisees realize that this ugly Public Policy contributed to their financial destruction and emotional pain, and bring this to the attention of The Congress of the United States.
Carol
Beth - I don't know who this Carol person is, but you should disregard her postings. From what I gather she has no professional franchising credentials and her posts are filled with incoherencies and inaccuracies. Your sister may have recourse against her franchisor, but this investigation will require the assistance of competent franchise legal counsel. Your sister should reach out to similarly situated current and former franchisees of her brand and research options.
Again I do not know this Carol person and while her posts may seem knowledgeable they are lack real substance. They are to be avoided.
Joe1000
Brenda --- I quote one of the NEW Rule Changes for you that just confirms the Old FTC Rule from the article A Road Map to the New FTC Franchise Rule that is available on Google to read:
"Further, The FTC clarified that franchisors are allows to make financial performance representations in the media if such information is directed to the general public rather than to prospective franchisees.8 News releases, website information, press articles, and the like are not financial performance representations unless they are supplies to prospects, or prospects are directed to them, during the franchise sales process."
How could they enforce this and how would this work in the real world? The Franchisor gets to disclaim everything in the actual contract that you will sign and how do prospective franchisees erase everything they have been told about success and profits?
I suggest you Google Up the Article Franchise Fraud: The Impact of Acknowledgement and Integration Provisions -- A License to Lie, Cheat and Steal? by Richad Solomon of Franchise Remedies and read it more than once.
I am out here just to WARN new prospects and especially the VET community who is vulnerable to predator franchisors because of a 2007 SBA PATRIOT EXPRESS LOAN INITIATIVE that is supposed to honor veterans who want to buy small businesses and FRANCHISES. I am close to loved ones, like you, who lost hundreds of thousands of dollars in a franchise adventure with a famous brand name.
I am not against franchising if the true risk of the investment as known to the franchisor is disclosed by the seller to the new buyer. This is not being done under federal regulatory policy and the new FTC Rule and our Congress needs to do something about this.
Carol
