FRANCHISE: Disclosures in statutory regulated markets

Item 20 discloses a list of franchise outlets, current and past and franchisee information. Terminated, cancelled and unrenewed outlets will easily tell the kind of franchisor you are dealing with. Some franchisors buy back failed or failing outlets and list them as company-owned outlets, only to offload them to new franchisees. In such a case the franchisee must be told who owned and operated the outlet for the last five years. Several owners in a short time may indicate that the location isn’t profitable or that the franchisor hasn’t supported that outlet as promised. Many franchisees in an area may mean more competition for customers. Some of the former franchisees may have signed confidentiality agreements that prevent them from speaking. Franchisors practicing franchise fraud may have a high number of former franchisees under a gag order.

FRANCHISE: Disclosures in statutory regulated markets

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