While the Commission's proposed requirements with respect to disclosure of financial performance of operating units is a major step forward and deserves support, the omission of certain language which should be required in Item 19, together with the lack of a provision clearly allowing the Franchisor to provide additional information and warnings, raises the possibility of continued abuses in this area. In the Advance Notice of Proposed Rulemaking, the Commission suggested draft language warning prospective Franchisees to not rely on information regarding sales, income or profits where written substantiation is not provided. That language has been omitted in the most recent draft, without any explanation, other than a reference to one commentator's concern that such language might serve as a disclaimer of liability. It seems clear that that is the message that all prospective Franchisees should receive. However, the overriding goal, in each instance, should not be to preserve a potential plaintiff's cause of action, but to prevent the injury or loss in the first place.
Past results are no guarantee as to future results.
While some units have reported the results shown in this disclosure document, there's no guarantee you'll do as well. Second , since a few states have restricted the ability of Franchisors to include warnings in Item 19, the Rule should expressly allow such cautions or other information to be included by the Franchisor. As we understand it, the Rule would not prohibit Franchisors from providing additional disclosures, information and cautions in any of the disclosure items, and that freedom to provide supplementary information should be made express for the entire disclosure document, including Item 19. We very much appreciate the opportunity to submit these comments and suggestions and hope that they will be helpful in preparing an update to the Rule. Steven D. Wiener, Esq.