Franchise Rule Protecting Franchisees, Government Study Finds

2 min read
Opinions expressed by Entrepreneur contributors are their own.

Washington, DC-A report issued by the U.S. General Accounting Office (GAO) confirmed that the Federal Trade Commission (FTC) is effectively enforcing its regulation that protects those who invest in franchised businesses.

The GAO report noted that over the seven-year period from 1993 to 1999, only 20 cases involving franchises were determined serious enough by the FTC to warrant court action. The agency obtained some form of relief for investors in all cases.

"The GAO report confirms what we've known for some time-that there are no systematic problems with franchising that require government solutions," Don DeBolt, president of the International Franchise Association, says. "The franchising sector is doing a very effective job of self-regulation and the Federal Trade Commission is enforcing the Trade Regulation on Franchising and Business Opportunities."

DeBolt says the report also reassures Congress that there is no need for federal legislation to regulate relationships between franchisees and franchisors.

The isolated incidences of franchise relationship problems, the report says, do not justify the FTC conducting a more widespread investigation of relationship issues or developing a new rule that addresses the terms and conditions of franchise contracts.

"According to FTC staff, data the FTC has collected, while limited, suggests that franchise relationship problems are isolated occurrences rather than prevalent practices," the GAO report states. -International Franchise Association

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