In today’s tough economic times, many an individual can and will fall victim to investment fraud in their desire and perhaps desperation to find a new income stream to replace that of their lost employment. Many business opportunities don’t provide the protection that franchising offers. In many countries, franchising represents a greater protection against fraud due to the consumer protection and disclosure laws that now exist.
Many countries around the globe have disclosure laws – the US, Canada, Spain, Mexico, France, Germany, Australia, Malaysia and Brazil to name a few notable examples. Governments have enacted various franchising laws to provide protection to unsuspecting investors falling victim to various forms of commercial fraud.
France, Spain, Italy and Belgium have pre-sale disclosure obligations. Australia has a mandatory Franchise Code of Conduct which regulates the contents of agreements. Brazilian franchise law applies in all Brazilian territory.
In the US, as a result of fraud that has been committed over the years within the field of licensing and franchising, federal law is governed by the Federal Trade Commission (FTC) and has established disclosure and franchising laws to protect investors in this business model. The most recent Amended FTC Rule applies nationally to the offer and sale of franchises; in addition some states have their own franchise laws that apply to their state. These laws give protection to franchisees that reside in the state or establish a franchise business in the state. The Franchise Rule protects potential buyers of franchises by giving the material information needed in order to weigh prudently and independently the risks and benefits of this business model.
Nigel Mayne,CFE, is an IFA certified franchise expert, a widely respected authority on franchising, with expertise gained over more than 15 years. He is the founder and president of the MatchPoint Franchising Network. He can be reached at (001) (416) 644-1040 x233 via fax at (647) 724-0711 or via e-mail at firstname.lastname@example.org.