Recently the Federal Trade Commission put forth a franchise report for possible rule making. In the report is offers possible law changes, which will screw over small business. Isn’t this so typical of the Washington DC bureaucracy with their fingers up everyone’s you know what? The Federal Trade Commission appears to want to revamp the franchise rule and effectively crush small business franchised outlets.
The biggest issue now in American Commerce is how can small businesses compete with the larger Box Stores? Well, through economies of scale, small business co-ops and franchising. But if franchising is inhibited in the market place you have in fact eliminated the competition of the giant corporate box stores. Yet small business employs over 70% of our economy. So further regulations on franchising and incessant over disclosure (190-230 page UFOCs) doesn’t help anyone as it causes the following;
Over Disclosure creates barriers to entry into the franchising field for franchisors, who have a mortality rate of 5:1 in the first five years already, yet the Federal Trade Commission claims to be pro-competition? BS, it is total protectionism, helping larger corporations against entrepreneurship. If no new industries get a foothold the older industries like text tiles, mining, steel will slowly dwindle with no new venues to buy up or expand into. Without new industries starting and with old ones maturing and dying we cannot have a healthy economy. The $25-35K to prepare documents and the $20K to stay registered in Franchise Registration states and the $45K for yearly audits does not allow for future Ray Kroc, built from scratch entrepreneurs. They cannot succeed, build and continue; today even well financed ones have issues. (i.e. Shlotskys Deli, Krispy Creamed).
Over Disclosure decreases jobs in the private sector due to fewer new entrants. Forcing lower wages in box stores and further diminishing the middle class, whose buying power is supporting the whole world’s economies and helping new nations realize freedoms and human rights.
Over Disclosure decreases tax base; Less Jobs and commerce mean less tax base for government agencies meaning the Federal Trade Commission has less budget (Ah ha, finally good news, at least all this over regulations will help reduce government bureaucracy as you people at the Federal Trade Commission will no longer have jobs, great you do not deserve them!).
Over Disclosure decreases competition in the market place and reduces consumer choice. Forcing people to buy a one sizes fits all product lines, which is most likely made outside the US.
Over Disclosure destroys communities as individual franchised units are small businesses which support communities, where as large corporate stores often do not join local committees, service clubs, make donations, or participate in local events, chambers of commerce and support local sports teams like soccer, little league, high school bands and Boy Scouts (Oh, whoops, I am not allowed to say that as some people at the Federal Trade Commission do not like Boy Scouts because of their personal sexual preferences, instead wish to hold that against the kids, so strike the American Apple Pie example of the Boy Scouts, we do not want to hurt anyone’s feeling?). Large Corporations during down economic times are the first to cut such things from their budgets if in fact they have such programs at all. Some do, but comparatively speaking not as large a percentage of gross sales as small businesses, which most franchised outlets are.
Over Disclosure hurts those who wish to own a business of their own as part of their American Dream because franchisors have to raise fees and therefore fewer Americans will qualify to buy franchises. It is the same scenario as home ownership for young couples, raise the price of the house a few thousand dollars or the interests rates a couple of points and all of a sudden the dream vanishes as they cannot qualify. In the case of franchisors that savings to the buyer, that extra money would have went to attorneys, yet these lawyers have hyper-inflated the costs associated with franchising and cannot seem to understand why franchise litigation and legal services are not as good as days gone by? Well it is quite simple. There were 6000 franchisors in the 80’s, less than 2000 active today. Ever ask yourself why? Over regulation, lawsuits and a complete misunderstanding of how franchises work by state registration departments and those fine folks in government over at the Federal Trade Commission who are so easily manipulated by lawyers.
In fact there is only one group in the entire world who is well served by over regulation and that is the lawyers, that self-serving group who actively manipulates the rules in franchising. The Federal Trade Commission is obviously in bed with the lawyers and we know that most of Federal Trade Commission employees in the franchising division will go on to work for the very law firms making comments on this rule. How perfect is that? Wonderful, well for everyone except the:
Consumer
Citizens
Country
Franchisors
Franchisees
Economy
Entrepreneurs
Free Market
Think about it America, isn’t it time we asked our Congressmen to cut the budget of such a bureaucracy, if they cannot even manage a small group in a small department of a small agency in the Justice Department? Why would we all allow the United States Justice Department’ Federal Trade Commission’s Consumer Protection Division’s Franchise Group get away with such atrocities to the health and welfare of our nation’s small businesses? Thanks for listening, think on it for me.
