At what point do you believe a Financial Performance Representation crosses the line outside franchise disclosure requirements?
As discussed at various break-out sessions during the recent IFA Convention, social media has created many opportunities to present and discuss franchise opportunities across and through multiple channels, often linking from one social media platform to another. As many franchisors jockey for a competitive edge and increase their social media efforts, it’s important not to lose sight of franchise disclosure requirements.
The practice of embedding financial information within online press releases, blogs and even within Facebook posts, appears to be growing. Certainly, publishing this information by itself doesn’t create an FPR. But, directly or indirectly referring candidates to the information is an FPR, and if the information is not part of a franchisor’s Item 19, it becomes an improper FPR.
Considering the linking capabilities within social media, often to the point of creating a cross-platform, multi-tiered effect, some so-called, self-professed industry professionals apparently believe they can get away with improper FPRs. Especially, as social media is still “relatively new” and growing into new areas, misunderstood by many, and virtually under the radar of most authorities.
It appears the thought is, if enforcement of franchise disclosure is lacking in traditional areas, social media has become the new wild west!
Beyond the obvious illicit practices and potential ramifications to unsuspecting franchise candidates, what also causes reason for concern is the impression it makes upon start-up franchisors that follow suit – often, not even realizing the practice may be improper. After all, they see it being done by individuals who they believe are reputable franchise professionals. So, why not follow the same practice that they unsuspectingly come to believe is actually a best practice?
Sure, everyone is responsible for their own actions, and ignorance is not a legal defense. However, if these illicit practices continue within franchising, more and more will participate to the point of it becoming a common practice, with many believing it has become a best practice. Momentum picks up with so-called thought-leaders promoting the practice as an effective lead generation strategy, influencing even more franchisors. Some will be unsuspecting. Some will just jump on the bandwagon.
At what point will these practices be considered to be out-of-control and intolerable, and detrimental to franchising?
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