National Franchise Registry

| 0 Comments | 0 TrackBacks

"The state franchise registration process, virtually unchanged for nearly forty years, is archaic, time-consuming, and extremely costly for franchisors; offers little protection for prospective franchisees; and fails to take advantage of current computer technology. 

The time has come for a twenty-first-century solution." wrote franchisee attorney Keith Kanouse in the ABA's Franchise Law Journal, Summer 2009.

Keith argues that when the FTC changed their franchise disclosure documents, effectively bringing the federal disclosure in line with the state disclosure requirements, the FTC missed a golden opportunity to require federal registration.

Think about the possible advantages that franchisors would have enjoyed, had the FTC required federal registration:

1. Franchisors would have effectively had one registration process, at the national level. This would lower their filing costs.

2. The renewal dates for registration would be uniform, making it less likely that franchisors would inadvertently miss a registration date, which has resulted in at least one successful legal malpractice suit by a franchisor against its attorneys.

3. There would be an end to the practice of selling in franchises in the unregistered states, as precursor to selling in the registrant states. Less money would flow to more speculative franchise systems, which would benefit the better systems.

4. Prospective franchisees would be able to obtain the FDD from the federal registry, read and comprehend it long before they did their pre-sale investigation.

5. Finally, with the many of state's in dire financial condition, the number of people needed to review the registration has been cut back - leaving these franchise systems without the ability to sell in a registrant state.

On the later point, Keith notes: "The states don't want to give up their power even though they complain about being understaffed and underfunded. There have been cutbacks and furloughs as you know.

With most franchisors on a calendar year fiscal year, most renewal filings are made in April/May creating an enormous backlog.

For existing franchisors in states where there is no automatic effectiveness of the renewal application, it causes them to cease selling until these until the states get around to reviewing the renewal.

There is no urgency on the examiners."

This is an issue that all franchisee associations should agree on, with the franchisors, it just makes sense to have one single registry system which minimizes costs, delay and increases proper pre-sales research.

Enhanced by Zemanta

Our Franchise Commmunity on LinkedIn

Join & Contribute to our Franchise Commmunity on LinkedIn.

Be Recognized as an Expert.

Leave a comment

No TrackBacks

TrackBack URL:



Search for Articles

Follow Us

About this Entry

This page contains a single entry by Michael Webster published on August 25, 2010 12:56 PM.

Erin Andrews Lawsuit over Nude Video Tape was the previous entry in this blog.

They Might Die Before They Hit the Floor is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.