Because a small business's legal funds may be extremely limited, information about a franchisor's law suits could be crucial to the survival of the business. The Office of Advocacy supports the disclosure of franchisee statistics similar to those found in Item 20 of the UFOC guidelines. If a particular franchisor terminates the franchise relationship without just cause or has a tendency not to renew a franchise agreement, disclosure provides notice to the franchisee that his investment is not a permanent or quasi-permanent lifetime commitment. It is merely a temporary business investment where he may be one of several investors during the lifetime of the franchise. Although the FTC seeks information about several aspects of business opportunities, Advocacy is particularly concerned about the amount of investment necessary to trigger Franchise Rule coverage.
Advocacy is aware of one particular industry where the problem is pervasive.
In the travel industry, there is currently a scam where a potential entrepreneur is given an opportunity to purchase the rights to become a travel agent. The entrepreneur is provided with papers that indicate that he is a travel agent although he lacks the proper training and credentials to perform in a competent manner. The travel agency scam is problematic on several fronts. From the standpoint of the investor, the entrepreneur is being swindled out of his money. The negative experience could discourage the businessperson for pursuing business ventures in the future.