|Received:||11/12/2004 11:51:59 PM|
|Agency:||Federal Trade Commission|
|Rule:||Notice Announcing Publication of Staff Report on the Franchise Rule|
Comments:To pretend that Earnings Claims are not made is to ignore reality and our common-sense knoledge of how we make any investment decisions. I have personally heard franchisor sales reps at meetings, where the standard public response is "The FTC prohibits us from making Earnings Claims." At some point thereafter, the infamous "cocktail napkin" makes an appearance--and then disappears into the franchise salesman's pocket. Franchisors make earnings claims in the media, such as Nation's Restaurant News; one franchise attorney helpfuly noted that making an earnings claim in the Wall St Journal would not be a violation of NY's Franchise Law. The other use of pseudo-mathematics is with respect to success rates suggesting that franchising is a "sure thing." Suffice it to echo Commissioner Varney:"it truly is in everyone's best interest not to tout overly optimistic success claims." I oppose any requirement to mandate Earnings Claims, but would suggest requiring language to the effect that "Our company has chosen not to make any claims with regards to whether or not our franchises are profitable. You should not rely on any claims, but should conduct whatever research you think is necessary before deciding whether this franchise is a good investment." I would require that any franchisor making an earnings claim to the media, or to a book author (such as Blimpie to Professor Robert Perry) to substantiate that claim. The FTC should not permit franchisors to circumvent the Franchise Rule so blatantly, particularly when franchisor attorneys invite them to do so in statute commentaries. As to success rates of franchising, I would prohibit any claims in franchise sales materials which does not reasonably relate to the particular chain (or at least industry sector) being sold by that franchise salesman. Finally, I am skeptical of regulators when the FTC tells the ABA that it does not want to "have a negative impact" on franchise sales, New York's Attorney General says that franchising is "one of the most successful techniques" to achieve the "American dream" and Wisconsin opposes franchise regulation, since "cream rises to the top." Regulators should be neutral and balanced, and should not be shills for the industry that they purport to regulate. With all due respect, that is not how franchisees percieve the current regulatory paradigm.