Two articles in one day warning franchisees about the risks in franchising. This article in the Herald Today advises franchisees to spend 30 hours reviewing the Uniform Franchise Offering Circular and agreements, as well as interviewing franchisees about assistance, operating costs and percentages of expenses to total revenue.
The franchise litigation I've seen typically involves franchisees claiming that they skimmed the documents provided to them and called a franchisee or two. Whether these claims are made to try to avoid responsibility for reading all the disclaimers and waivers contained in the UFOC or whether people on the verge of buying their own business don't do their due diligence is not really important -- it's probably some combination of both. But I'd venture to guess that the average individual franchise operator does not spend the recommended 30 hours reviewing/studying these materials and interviewing people in the system before they decide to sign up. Having a dispassionate, business-like view of a franchise as an investment with substantial risks is the only way to approach the endeavor. Otherwise, franchisees are likely to ignore warning signs and avoid asking difficult questions.
Posted by franchiselawblog at February 27, 2005 03:35 PM