How would your franchisees answer this question, “Does your franchisor have integrity?”

Integrity is what you do when nobody is watching!

Some franchisors appear to believe that when a person asks for the franchisor’s FDD they need not give it.

Why? Here is, slightly edited a franchisor’s broker’s answer,  which appeared on a major business social network.

“Because they [franchisor] are not required to provide an FDD upon request.

Here is the excerpt from the FTC 2008 updated ruling:

“Upon reasonable request, franchisors also must furnish a disclosure document to a prospective franchisee earlier in the sales process than 14 calendar days before the franchisee signs or pays.

The failure to comply with a reasonable request for an earlier delivery is an independent violation of the Rule. This does not mean that a franchisor must tender a disclosure document to any person who asks for a copy.

Rather, it applies where the parties have taken steps to begin the sales process.”

The problem is that many franchisors begin a validation process with the prospective franchisee, but believe that they haven’t “taken steps to begin the sales process”.

But, the way I see it, is if a candidate is on a validation call then I think it’s hard to dispute that you’re not knee deep in the sales process!

Some brokers will argue otherwise.

“If I took a lead to many franchisors and after the first call said to the franchisor, “the candidate would like to reasonably request an FDD at this time” most of them WOULD indeed laugh or explain their “sales process” to me where the FDD is provided after the application which comes after the webinars and other phone calls.

I can only think of a handful of times where an FDD was provided after the first call with a franchisor.”

Irrespective of FTC Franchise Rule enforcement, it’s not the candidate’s duty to know that they are entitled to an FDD upon reasonable request, it is the duty of the franchisor to comply with the FTC Rule.

If you as a broker or the franchisor has a bona fide prospect considering a particular franchise you as the broker must communicate an FDD request to the franchisor. The franchisor must fulfill the request and track and record all FDD requests.

Even if the FTC is not watching, it is not okay for franchisors and brokers to break the rule. I recommend taking a look at The Franchise Sellers Handbook. It’s a great resource and most likely will answer a lot of questions that you may have.

Remember, integrity is what you do when nobody is watching!

*Reprinted from International of Association Franchisees and Dealers Feb 2012

Bookmark and Share

About Paul Segreto

Entrepreneur, Franchising & Small Business Professional, Top 100 Champion Small Business Influencer Awards 2014 & 2015, Popular Blogger & Podcaster
This entry was posted in Franchise Marketing, Franchising, Legal and Research and tagged , , , , . Bookmark the permalink.

One Response to How would your franchisees answer this question, “Does your franchisor have integrity?”

  1. integrity can be checked by the FDD document which must be necessarily met at the time of preparing the document.
    http://www.businessforsale-canada.ca/selling-a-business-canada.php

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s