The purchase of a franchise is a major financial investment for a franchisee. Advocacy acknowledges the fact that the additional disclosure requirements may be costly to the franchisor. However, considering the monetary outlay that is required by the franchisee to purchase a franchise, the additional cost for the franchisor in providing the disclosure information, should not be determinative. In fact, given the amount that the franchisor stands to gain, should the potential franchisee decide to invest, the cost of disclosing additional information may be minimal. The Office of Advocacy supports the modification of disclosure requirements to require franchisors to disclose law suits filed by franchisors against franchisees, in addition to suits filed by franchisees against franchisors.
Litigation is a costly process for all parties involved.
By providing information about law suits between a franchisor and its current franchisees, a potential franchisee may be able to obtain foresight into management style, behavior, and reasonableness of the franchisor before entering into a franchise agreement. For example, a law suit could provide information about the franchisor's performance, non performance, or interpretation of a franchise agreement, as well as its expectation of its franchisees. It can also give an indication as to whether a franchisor will utilize the courts for the purpose of harassing a franchisee. Moreover, disclosure provides the potential franchisee with information about the franchisor's litigatory style. 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.