The Need for ‘Plain English’ in the World of Franchise Law!
Remember when Grandma used to say: “Speak in plain English!” That was, of course, the times when we were speaking about the newest ‘big-hair’ band on the charts. Nowadays, it also pertains to the new ‘text speak’ (which makes no sense whatsoever), and the latest TV and movies that introduce everything from vampire locations to werewolf heroism, sprites, even Gossip Girls who are ‘like, like, like… .’ These descriptions can go on forever and NO ONE knows what the kid is talking about!
Well, there is another place where ‘Plain English’ actually HAS to be used. Yes…the world of franchise law. If you’ve ever dealt with documents – from rental contracts to the ‘book’ you received when purchasing a car, buying a cell plan, or taking out a loan – you have sighed at the monumental number of electronic pages that could actually have you in deep trouble once your signature hit’s the bottom line. But it’s far easier to just sign, trust who you’re speaking with and, basically, hope for the best. Because in your busy day you do not have seventeen hours set aside to sit at a desk with a legal dictionary to figure out the twists and turns of what you’re reading. Heck, even the Constitution and Declaration of Independence were easier than this present-day jargon, and those were the foundation for a whole country!
The industry that is expanding by leaps and bounds over the past decade is the word of franchising. With the ups and downs in the economy, many people have decided to become their own boss by setting up a franchise or becoming a franchisee and buying their own ‘unit.’ However, The Franchise Rule comes into play when speaking about this industry, and it’s one rule that has been amended so that all franchisors out there have to prepare their franchise documents with ‘writing in Plain English.’ What’s amazing is how many franchisors don’t bother with this particular addendum.
The Franchise Rule is all about ‘defining the acts or practices that are unfair or deceptive in the franchise industry in the United States,’ and is published by the Federal Trade Commission. The Rule is one of those rare entities that actually wants people to make informed decisions and prevent deception in the sale of franchises by requiring franchisors to provide prospective franchisees with the ultimate facts. Plain English, of course, means that the language used must be understandable by a person who is unfamiliar with franchise law – and, lets face it, that’s most of the population.
Like our teachers taught us in grade school, this means the documents presented must use short sentences, everyday language, and an active voice wherever possible. It avoids all that legal jargon and highly technical business terms and is a true necessity, considering the fact that, once signed, you begin your journey into being absolutely responsible for a business. The Rule requires franchisors to provide all potential franchisees with a disclosure document containing specific items of information about the offered franchise – everything from info on its officers and other franchisees. Not to mention, all disclosure information about the franchisor, including the franchise’s litigation history, past and current franchisee contact information, any exclusive territory that comes with the franchise, assistance the franchisor will MOST DEFINITELY provide franchisees, and the cost of purchasing and starting up the franchise must be in writing. Another door that may be opened is if a franchisor makes representations about the financial performance of their franchise. If they do that, then this topic also has to be covered, as well as providing the material to back up their statements.
The ‘Plain English‘ amendment brings the FTC’s Rule into better alignment with state franchise disclosure laws. However, when asked if the ‘Plain English’ requirement of the FTC’s Franchise Rule was being enforced…a ‘yes’ was only given by a few of the regulated states – not even close to a majority. This hurts. It hurts the franchisor who needs to be absolutely clear with the franchisees coming aboard.
In order for a franchise to work and work well, the franchisor and franchisee must be in total sync with one another so that each franchise unit can not only get off the ground, but soar! These franchisees must have full knowledge (that they can understand) of what these agreements are all about, because only when everyone is on the same page does ROI and a customer base increase!
Noncompliance – loss of that ‘Plain English’ – makes it far more difficult for the franchisors to get these franchisee prospects to seek them out and understand their company’s mission and outlook. So, why not comply? In order to make absolutely sure this is being done, a franchise attorney becomes as much of a necessity as that ‘plain English.’ You need a person in your corner who KNOWS what the rule is all about. The attorney understands the need for it and will make sure that YOU and your franchise are not being put into a situation that you do not want to find yourselves in.
Hmm… Grandmothers and franchise attorneys – basically the same job when you think about it: Protect the ‘kids,’ make life better, get that ‘Plain English’ to come through so that everyone in the room understands what on earth you’re talking about. Now if your franchise lawyer could only learn to bake those fantastic lemon cookies like my grandma used to make – they’d tie for the top spot! But, alas, we can’t have everything.
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