Catch The Wave

Under The Laws Of The State Of . . .

Regulation is another hot topic that both franchising and the Internet wrestle with. The FTC, which regulates franchising on a national basis, is now engaged in rulemaking regarding how the UFOC could be properly transmitted to prospective franchisees via the Internet. Currently, some insiders are concerned about proving when the document was delivered and received via the Internet, as well as determining whether a printed copy is necessary. If these rules of engagement can be more clearly defined, it's easy to envision a day when serious franchise candidates could review an offering by conducting searches that highlight every place in the document where keywords such as "penalty," "noncompetition" and "termination" appear.

There is a section of the FTC Web site that plays like a grainy, black-and-white B movie (http://www.ftc.gov/bcp/franchise/xscripts.htm). This buried link to transcripts from FTC Public Workshop Conferences shows the purported dark side of certain franchise experiences. While you should go there to examine some of the issues facing disgruntled franchisees, please remember that the testimony there was not given under oath, the franchisor was not necessarily present and there was no cross examination. However, it sure is nice to have the information available.

Some states are also beginning to regulate the Internet with respect to franchising--they're requiring franchisor disclaimers that state the Web site is not an offer of a franchise. While consistent with the regulation of other forms of franchise advertising, this is essentially a Band-Aid to tide regulators over until they're forced to face the larger issues that loom ahead.

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This article was originally published in the January 2000 print edition of Entrepreneur with the headline: Catch The Wave.

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