Financial Performance Representations in Digital Space – Friend or Foe to Franchising?

At what point do you believe a Financial Performance Representation crosses the line outside franchise disclosure requirements?

As discussed at various break-out sessions during the recent IFA Convention, social media has created many opportunities to present and discuss franchise opportunities across and through multiple channels, often linking from one social media platform to another. As many franchisors jockey for a competitive edge and increase their social media efforts, it’s important not to lose sight of franchise disclosure requirements.

The practice of embedding financial information within online press releases, blogs and even within Facebook posts, appears to be growing. Certainly, publishing this information by itself doesn’t create an FPR. But, directly or indirectly referring candidates to the information is an FPR, and if the information is not part of a franchisor’s Item 19, it becomes an improper FPR.

Considering the linking capabilities within social media, often to the point of creating a cross-platform, multi-tiered effect, some so-called, self-professed industry professionals apparently believe they can get away with improper FPRs. Especially, as social media is still “relatively new” and growing into new areas, misunderstood by many, and virtually under the radar of most authorities.

It appears the thought is, if enforcement of franchise disclosure is lacking in traditional areas, social media has become the new wild west!

Beyond the obvious illicit practices and potential ramifications to unsuspecting franchise candidates, what also causes reason for concern is the impression it makes upon start-up franchisors that follow suit – often, not even realizing the practice may be improper. After all, they see it being done by individuals who they believe are reputable franchise professionals. So, why not follow the same practice that they unsuspectingly come to believe is actually a best practice?

Sure, everyone is responsible for their own actions, and ignorance is not a legal defense. However, if these illicit practices continue within franchising, more and more will participate to the point of it becoming a common practice, with many believing it has become a best practice. Momentum picks up with so-called thought-leaders promoting the practice as an effective lead generation strategy, influencing even more franchisors. Some will be unsuspecting. Some will just jump on the bandwagon.

At what point will these practices be considered to be out-of-control and intolerable, and detrimental to franchising?

What Excites You About Working Within Franchising?

What an extraordinary time it is in franchising. Many of us are still riding high from the IFA Convention. Approximately 160 franchise professionals attended the Franchise Unconference last week in Utah. It is my understanding turnout at this week’s Franchise Finance Conference in Las Vegas was very good. And, in a few weeks many of us will be in Washington DC for the International Franchise Expo. That’s just a great deal of positive energy in a six-week period within franchising. Certainly, it’s exciting to be working in franchising as the economy continues to rebound.

Of course, it’s easy to be excited when there’s a load of positive energy at showcase events. Seeing long-time friends with similar interests and objectives adds to the excitement. It’s also relatively early in the year, and many are filled with New Year’s resolutions that have yet to be challenged. Optimism fuels excitement! But, let’s take a step back and look at the core of franchising. Let’s evaluate why we have decided to continue earning a living within franchising. Through the worst of economic times, with franchise sales bottoming out, why did we hang around instead of doing something else for a living? Sure, many will say there weren’t other jobs available. But, I truly believe there was more to it than that.

Approximately eight months ago, in the LinkedIn Franchise Executives group, I asked, What Excites You About Working Within Franchising? and received over 50 responses. Let’s take a look…

John Teza, President at Janus Brands, responded “Empowering an individual to change their lives. No matter the intended change, be it in terms of income, lifestyle, or equity building, for many individuals, opening a business is a life changing experience. Playing a small part in that transformation is very rewarding.”

Lyndsey Jardine Wolfsmith, Business Coach at The Entrepreneur Source, exclaimed “Love your question Paul! I think franchising is fascinating…there are so many facets from developing a successful franchise model to helping clients understand the sheer breadth of options. When you are surrounded by all that variety, how can you not be excited!”

Even The Franchise King, Joel Libava, chimed in “I really enjoy moving folks away from corporate employment, so that they can have their shot at the American Dream. (Only if it makes sense to do so on a whole bunch of levels) I also enjoy providing an independent perspective on the state of franchising in a very gentle way.”

Many of the responses spoke about the satisfaction of putting people in business, helping them achieve the American Dream. And, despite what franchise professionals went through at the low point of the economic downturn, some only needed to be reminded of the passion behind franchising to get moving back in the right direction as evident by the following response…

Kevin Joiner, former, President at Crye-Leike Franchises, stated “Wow! Reading all of these positive comments re-energize me dramatically. I agree with many of the comments. I am the FORMER president of a Real Estate franchising company that operated primarily in the Southeastern U.S. Unfortunately, I was required to layoff my complete staff effective March 1, 2010 (as a cost-cutting, cost-savings measure) and turn over franchise system oversight to the founder and owner of the parent company. Having grown the organization from virtually nothing, into a $500 million dollar sales enterprise with approximately 50+ franchisees in six years, it was hard to take. However, I am expecting to hopefully regain momentum and move forward with another organization soon.”

Many ask how I would answer my own question…

“I’m excited to work within franchising because I get many chances to help franchise organizations succeed at all levels. I know that’s a lofty proposition, but it’s true. It’s what I’ve dedicated myself to as I have recovered from a near-catastrophic experience ten or so years ago as a once-successful multi-unit franchisee that took his eye off the ball and subsequently failed. Certainly, it would be easy to reflect upon what that experience did to me. But there are other things to consider as such experiences can effect entire franchise organizations. There could be collateral damage, and at times, a ripple affect.

Of course, I do what I do to earn a living and provide for my family. But I could do that in a host of different industries or business environments. Instead, I chose to put the bad experience aside and focus on how I can help others within franchising. Not only to avoid the mistakes I’ve made, but to focus on best practices that lend towards franchise success at levels.

With extensive experience and success in franchise marketing and development, and in training franchisees and franchise staff alike, gained in the various positions I have held for franchisors, I have focused my attention on making a difference in franchise organizations in these key areas. Sure, many know me from my almost incessant social media activity, but I’m just embracing what I believe to be a tremendous technology and communications tool that when utilized effectively and coupled with best practices, will contribute to franchise success at all levels.”

In case you haven’t noticed, it is also the same response when I’m asked, What is it that I do?


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