So, I wanted to share this with this subreddit because Franchising is a massive component of Small Business and I'm kinda close to it. This Report is 100% spot on.
This Senator, Catherine Cortez Masto, also happens to be Nevada's former Attorney General, and has been working on reforming the franchise industry and just released this amazing report about the state of the industry and proposed reforms.
Anyone remotely involved or interested in Franchising or Small Business should read this. It really shines a light on this industry, as well as the impact of a bad choice in certain key decision making areas (suppliers, 3rd party services, contracts etc....). Always try to learn from all failures, not just your own!
This is an outright treasure trove of information for this sub. They:
- Discuss and analyze failed / risk franchise models
- Provide SBA data on Franchise Loans including failure rates
- Experimac for example (The used apple store franchise) has an SBA Loan Default rate of over 40%.
- Commentary from the actual public (taken from an FTC Commentary period) discussing the franchise industry. There's a lot of sad stories.
- Discuss the harm of inadequate 3rd party services (in this case mandated by the franchisor, but we all know what bad 3rd party service can do to you, imagine being locked in).
- Discuss the lack of Regulatory oversight and protection for franchisees
- Only 13 states have regulatory laws on the books to protect franchisees, and even then, it's difficult to get enforcement
- Discuss abusive contracts that prevent the franchisees from being able to sue
- Above all, provides real world, meaningful potential solutions to these issues, that of course, benefit the small business owner via regulatory measures.
Update - not sure how I missed this this yesterday, but Cortez Masto's Office introduced the legislation to combat this. Another user sent this to me just now:
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Senator Cortez Masto introduced the SBA Franchise Loan Transparency Act (S. 1120).
Cosponsors include Senators Feinstein (D-CA), Murphy (D-CT), Warren (D-MA) and Baldwin (D-WI).
Requires average/median first year, average/median for all stores and store closure/sales first year.
https://www.cortezmasto.senate.gov/news/press-releases/cortez-masto-leads-legislation-to-curb-harmful-practices-in-the-franchise-sector-protect-small-business-owners
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