International Law

Reforming Franchise Regulation

Rupert Barkoff, a well known franchisor lawyer, writes about franchise regulation:

"I am not totally convinced that a complete elimination of franchise disclosure document review would be good.

However, presently the system has erred on the side of too much review.

Since there appears to be little interest in a federal-level review requirement preempting the state reviews, the remaining registration states might consider outsourcing the process to a single entity that would be charged with responsibility for performing this function.

This would eliminate cost and simplify the process, but retain whatever benefits there may be to disclosure document review."

There are three types of statutory protection for prospective franchisees: none, notice requirement, and document review.

All are highly unsatisfactory. Obviously no disclosure is counter-productive. A notice requirement, which ensures that a prospect get a disclosure agreement 10 or 14 days before signing the franchise agreement is also pointless - no prospect takes the time to seriously review the material. Finally, the document review process promises more protection to the franchisee prospect that is actually delivered.

If pre-purchase disclosure has any chance of success, then we need a comprehensive filing system in which all the disclosure documents of all franchisors are available for public review.

Such a filing system would allow not only prospects but serious observers of franchisors to make trenchant public comments - making it harder for dubious systems to gain traction.

Full post as published by Misleading Advertising Law on November 03, 2008 (boomark / email).