The Challenges of Selling In Franchise Registration States

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How Are Regulations Hindering Franchisor Growth?

A number of the brands that we represent are clients of Harold Kestenbaum. If you have been in the industry for any period of time you know that Harold is one of giants of franchise law and has helped countless franchisors in his 35 years in the franchise industry.

We recently asked Harold to share his thoughts about the challenges that franchise systems are faced with in today's economy.  His thoughts are right on the money -- and the franchise industry needs to determine if anything can be done to alleviate some of the regulations.

  Harold Kestenbaum: Impeding Franchise Growth  

Over the course of practicing franchise law for 35 years, the majority of my clients have faced the same challenges when it comes to selling their franchises in franchise registration states--and believe me, it is a challenge. While the states are charged with protecting the consumers, i.e., the franchisees, they need to be cognizant of the fact that we are only now putting the recession behind us. 

The state examiners have failed to realize during these hard economic times that unless franchisors are able to sell franchises in their states, those states will find themselves behind the economic eight ball. Franchises create jobs, bring in revenues and generally stimulate a state's economy. State examiners cannot be a roadblock to these overwhelming economic advantages. But, alas, they are. There are state examiners who take months to approve a franchise registration, thus hurting the economy of their particular state.

This is an absurd result from what should be a simple process. States like Indiana, Michigan and Wisconsin, which once had very onerous franchise registration laws and review processes, came to the realization that a simple filing of the FDD would be sufficient to protect their consumers. So these state no longer review the FDD, they simply approve it. If all of the registration states went to this process, more sales could and would be made and the state economies would prosper, instead of suffering.

I truly believe that the state agencies in charge of franchise registrations need to take heed that what they are doing is crippling their respective states economy. Until this happens, franchisors will continue to feel the frustration of trying to register in many of these states and therefore impede the growth of the overall economy.

Does regulation have an impact on your franchise sales?