The unseemly side of franchising

Interesting article in Franchise Times Magazine: November-December, 2009, by good reporter, Julie Bennett, who sheds more light on the history of the FTC Rule governing franchising. This is the second article Julie has done on the Minnie Pearl chicken franchise fiasco that I referenced in my blog.

Especially interesting in her article was a quote from The Wall Street Journal on the front page, May 1970, that said: "once considered the darling of Wall Street and the savior of the small businessman, franchising today is spurned on Wall Street and cursed on Main Street."

Maybe history will repeat itself, 39 or 40 years later, and we will see these headlines again!

But, of course, the big securitization borrowing accomplished by franchisors since year 2000 will mean that the media will be restrained in revealing or restraining public policy that has produced regulatory policy that permits franchisors in mandated disclosure to obscure the performance statistics of their systems from the new buyers of their franchises, as well as from the investors in the paper of the franchise systems.

I wish that Julie Bennett, in her interview, had thought to ask John Tifford, partner at Plave Koch, who apparently was chosen in 1979 to manage the Rule for the FTC, if he thought the fatal flaw in the FTC Rule (that was pointed out to the FTC by The SBA Advocacy Committee, The Chairman of the of the American Association of Franchisees and Dealers, Robert Purvin (in personal comments) and many others in public comments in 1997, and in the Article in the American Business Law Journal, 01 Jan 2003, entitled "Franchising Fraud, the continuing need for reform" ) needed fixing. It would be interesting to listen to testimony to the Congress by Mr. Tifford who would explain the "flaw" to the Congress as intentional or inadvertent, I'm sure, when under oath -- but I know this only happens in the movies!

Julie ended her article on an interesting, ironical, and amusing note when she indicated that "And claiming income before it's been realized is now known as "Minnie Pearling."