Ethics and Competition in Franchising Leaves Unanswered Questions

Ethics and Competition in Franchising Leaves Unanswered Questions

In most industries in the United States of America we find that there are competitors who were willing to cheat and they are very careful to cover their tracks. In fact, there are companies that specialize in corporate espionage. You can find them online and learn some of their tactics and you can even books looks at the local bookstore that tell you how to do it.

In the franchising industry, which I was involved with for nearly 2 decades we constantly had our competitors pretending to be franchise buyers so they can get a hold of our uniform franchise offering circular.

The Uniform Franchise Offering Circular or UFOC is a required document that you must give to each franchise buyer 10-days prior to them buying a franchise. This disclosure document and their attachments are generally 200 or more pages. And the UFOC there is more information than someone could get going through your personal laptop or through all the drawers and filing cabinets in your office.

It is an unbelievable amount of disclosure, which is required by law. This prospectus includes audited financial statements of your business, lists of all your franchisees, your future expansion plans and just about everything else including the color of underwear you are wearing this morning.

Obviously your competitors will want to get a hold of this information so they can better compete with you. In my company we actually had someone buy a franchise and allow us to help them set up the business only to find out later that the money they used was that of a competitor.

You see, they had no intention of running the business all they wanted is a complete set of our operations manuals, UFOC and all the inside information that our company had including the training modules. This dishonesty and lack of integrity is unbelievable.

Later, the individual attempted to file a complaint with a state agency and a federal regulatory agency that we had misrepresented ourselves during the sale of the franchise. Of course this is utter BS and yet there are consumer laws that protect the consumer over the word of the Franchisor.

In fact once a regulatory agency starts an investigation you are guilty unless you can prove yourself innocent. It is the biggest bunch of horsesheet I have ever seen. But this is how the reality of business works and how the regulatory agencies do things.

If the United States of America and the regulatory agencies cannot do any better than this then we can never have free enterprise or a level playing field in any industry. This also means that we will stifle innovation, hurt entrepreneurs and missed opportunities in the marketplace and be passed by other nations in various industry sectors and sub-sectors.

After retirement and looking back on the situation it seems to be a game that an honest person would not like to play, nevertheless an honest business person can do a lot of good in the world, but one has to ask is it worth it?

If Franchisors are required to disclose at that level of information to anybody buying a franchise and it is obvious that their competitors will attempt to get that information by pretending to be buyers. The government does not care and the regulatory agencies are blind to the reality of the situation.

And in doing so they cause more harm to new franchise ores and start ups and a they are really need that market sector much like they have ruined so many industries in the past. I hereby can damn the regulatory bodies of the United States of America as ignorant, incompetence and utterly worthless. And I have the facts, paperwork and proof to back up my statements, unlike the regulatory bodies or the competitors.

What we have here is a bunch of weak human beings that cannot handle competition and a lousy ignorant government to help them cheat. Who needs that? Consider this in 2006 and if you think this is too harsh, I say that is irrelevant because it is the truth.