From: csusuk firstname.lastname@example.org
Date: 4/29/97 2:51pm
Subject: 16 CFR Part 436
The international operations of American franchisors should not be exempt from the disclosure rule. There have been and will doubtless continue to be a number of notable failures when these concepts are sold abroad.
I have seen first hand what happens and it is an area of much concern. When the international operation is failing it causes great harm to those who were unfortunate enough to buy a foreign franchise based on incomplete or inaccurate information and no track record in the host country. It is not enough that such a franchise may be a household name with many years of trading experience in the United States.
Consider, for example, an American citizen residing abroad who purchases a franchise concept which has its origins and major track record in the U.S.A. In the interests of consumer protection, he must be given access to material information on the entity which developed the franchise in the U.S.
American concepts transplanted overseas tend to fail in the host countries because they have not been adapted to the conditions of the host countries and because they are often undercapitalized. Further, and most worrying, their track record in the U.S.A. may not have been exemplary. This is material information which may particularly affect the decision by Americans residing abroad to purchase a franchise concept which may not be working well in the US, or in fact be virtually, or actually unsalable due to the required disclosure and will undoubtedly be even riskier in a foreign country where it often has no track record or a very limited one.
S. Beavis Stubbings