Cary Ichter – Ichter Thomas (Profile)

“There is, for all practical purposes, no franchise regulation on the Federal level because the FTC has nullified its own regulations through its lack of enforcement and by not allowing for a private right of action… even when its regulations have been clearly violated.

“Regulations having to do with selling franchises typically come from the FTC Franchise Rule and the FTC apparently doesn’t have the resources to enforce that rule, or even go after franchises that are out there pulling some sort of scam. The FTC, as far as I can tell, doesn’t do much of anything to enforce franchising regulations.”

Read:  Attorney Cary Ichter: There is No Federal Franchise Regulation

”Franchisors use the line that franchise industries are ‘highly regulated’ as a ploy to ease investors’ anxieties.  However, it is our experience that the exact opposite is true.  Franchisees commonly mistake the Federal Trade Commission (FTC) as protecting their investment.  When in fact, the FTC merely provides rules with no means of enforcement.  It is only after a franchisee has been defrauded that he or she quickly realizes the FTC Franchise Rule does not provide them with a private cause of action.  Not to mention, the FTC also does nothing to regulate the information contained in Franchise Disclosure Documents.  While it may have rules and regulations for franchisors, they are merely used as smoke screens for franchisors to withhold pertinent information from its investors.

“Furthermore, in twenty-four states, franchise registration is not even required, but the FTC Franchise Rule must be followed, which provides minimal protection for franchisees.  There are some states that have franchisee protection statutes, nonetheless they still do not provide enough protection.  While some protection is better than none, these still do not provide the franchise industry with the status of ‘highly regulated.’  No one is there to enforce the rules leaving the franchise industry rife with fraud.  The need for the franchise industry to be not only highly regulated, but regulated at all, has been long overdue.”

Peter C. Lagarias – Lagarias Law Offices

”When the International Franchise Association and franchisors complain of excessive regulation in franchising, they should be firmly corrected. Repeatedly asserting a position does not make it so. And while everyone is entitled to their own opinions, everyone is not entitled to their own facts. The facts are that franchise laws do not cover the bulk of the three core areas of franchise relationships:

1. the initial period involving sale of franchises;

2. the franchise relationship during its term, and

3. the end of the relationship via termination, non-renewal or transfers.”

Read:  Over-Regulation of Franchising is a Myth Whose Time Has Passed , Peter C. Lagarias, Esq. [Coming Soon]

Howard Bundy – Bundy Law PLLC

“Franchising is not highly regulated. In truth, one could say that it is hardly regulated at all. If you want to see regulations, look at industries like securities, insurance, banking, construction and health care. Ask any contractor standing in line for a permit or waiting for an inspection about regulation. Ask an insurance executive as they are negotiating the details, including pricing, of their policy agreements with 50 state insurance officials. Franchising is subject to only a light touch of regulations—for the most part only even touching on what the franchisor can say before the sale. In almost all states, the franchisor can do anything to the franchisee after the sale with no risk of governmental action or liability.”

Read:  Attorney Howard Bundy: Franchising is Hardly Regulated at All

Stanley M. Dub – Stanley M. Dub Co. LPA

“Franchising is NOT a highly regulated industry, in the traditional sense of those words. At the federal level, there is only a pre-sale disclosure obligation imposed by the Federal Trade Commission, and the FTC makes little or no effort to police it. All the enforcement activity occurs at the state level, and this differs significantly from state to state. Only about a third of the states have an agency dedicated to franchise enforcement, and even those states generally regulate only pre-sale disclosures, with some also placing a few limits on the terms that can be included in a franchise agreement. Other states have laws on the books that allow a franchisee to sue for disclosure violations, but roughly a third of the states do not even have that sort of law on their books.”

Read: Attorney Stanley Dub: Franchising is NOT Highly Regulated

Richard A. Solomon

”Franchising is not a regulated industry in any real sense, It has to deal with certain “paperwork” laws requiring FDDs and registrations, but these laws have no enforcement teeth because they are all unfunded mandates. Enforcement is left to private civil litigation in over 99 % of situations. The claim that it is regulated is just a convenient sales pitch for those who don’t know what regulation is. By comparison, parking your car overtime on a parking meter is a regulated activity – far more so than franchising.”

Josh Brown

“Most people I meet with do believe that the industry is policed more than it actually is. They usually are not so sure about the regulations, but they erroneously believe that the stack of docs they receive that make up the FDD & other related agreements somehow legitimizes the franchisor… They unfortunately believe that the FDD contains everything that they need to know, and they blindly believe what is told to them by franchisors. I really don’t think, though, that the myth of the highly policed nature of franchises is that damaging… It may serve as some sort of comfort to them when they are told how highly regulated the industry is, but I really don’t believe it moves the decision-making meter. More of a danger is the damaging way in which some franchisors seduce would-be buyers to believe that the systems are better organized and more profitable than they actually are, which is is just downright misleading and unethical.”

Read Attorney Josh Brown: Legal Docs Don’t Legitimize a Franchisor

Louis A. Sousa

”Laws are in place but the protections do not go far enough to protect franchisee’s interests.  Repeated attempts to balance them in the legislative process are vigorously fought by the franchisors.   For example, few states have laws requiring a franchisor to renew a franchise agreement at its expiration, stripping an otherwise compliant franchisee of value as term expires.   Few state laws restrict termination of a franchise agreement to good cause shown.   Within the last decade Rhode Island’s legislature passed a law expanding franchisee rights and the franchisor lobby immediately descended upon the state house resulting in a substantial withering of the statute.”

Terrence Dunn

“Government regulation does not presume governmental oversight. Government regulation and/or oversight in an open economy should be employed judiciously and is never a substitute for intelligent due diligence and careful legal advice. The franchise landscape is regulated in the sense that all offerings are supposed to follow a rigid format. There is little oversight. The law is applied in different states in varying ways and it has little teeth to it. There is room for the unscrupulous to take advantage of the unwary. That is always the case in a free market. Too many cases arise because buyers don’t fully investigate the presented opportunity. That is avoidable. Hire a good franchise lawyer.”

Dan Davis – Ichter Thomas LLC (Profile)

”Franchising is a highly-regulated industry, but the nature of that regulation is limited in ways that prospective franchisees may not understand. The Federal Trade Commission’s (‘FTC’) Franchise and Business Opportunities Rule imposes extensive disclosure requirements on franchisors. The FTC’s Compliance Guide, for example, is 154 pages long. It is important to understand, however, that the Franchise Rule does not regulate the substance of franchise agreements. All the Franchise Rule does is to require franchisors to disclose certain information so prospective franchisees can make more informed (and therefore presumably better) decisions.”

Read:  Attorney Dan Davis: Is Franchising Highly Regulated?

Mitchell Kassoff

“The first answer to that question is yes, franchising really is a highly regulated industry.  There is a very detailed Franchise Disclosure Document required to be given to each prospective franchisee, plus registration requirements in many states.

“The second answer to that question is the effect of this regulation.  It is time consuming and expensive to draft a Franchise Disclosure Document and then to have it registered in the states that require registration, especially since each state requiring registration has its own special requirements.  The result is a detailed and complex document that is so detailed and complex that many prospective franchisees give up and don’t even bother to read it.  The effect of this regulation is an expensive document, that many prospective franchisees don’t read and which increases the cost to purchase a franchise.”