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Blenheim Expositions, Inc., a Winter Park, Florida-based company that produces a variety of franchise trade shows and expositions, has agreed to settle Federal Trade Commission charges that it misrepresented the results of a Gallup Poll featuring franchise success and earnings rates in its adver tisements promoting the International Franchise Expo, the largest of these trade shows. According to the FTC, the cited advertisements falsely stated that the Gallup Poll showed that franchisees earn an average pre-tax income of more than $124,000 and enjoy a 94 percent success rate. The proposed settlement of these charges would prohibit Blenheim from misrepresenting survey results or making unsubstantiated earnings and success rate claims in promoting and advertising franchise shows. The settlement also would require that Blenheim distribute consumer education information about purchasing a franchise at the shows it promotes for the next five years.

"We want to send a message to franchise show promoters that they have the same obligations to be truthful in their advertising as anyone else who is trying to interest consumers in buying a product," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "Misinformation about the likelihood of success as a franchisee is of particular concern given the sizable investments that are often required to purchase a franchise," she added.

In January 1992, the International Franchise Association (IFA) reported the results of a Gallup poll of 994 current franchise owners who were asked to report their estimated annual gross income before taxes as a franchise owner, and Gallup calculated the average of such incomes to be $124,900. No former franchise owners were contacted and the poll in- cluded reported results from a disproportionate number of multiple franchise locations. In addition, the poll did not ask franchisees to report their "average income," "pre-tax income," or "pre-tax profits" -- the terms used by Blenheim in the advertisements promoting the shows, according to the FTC's complaint detailing the charges.

The complaint cites numerous claims in ads promoting the shows, such as:

  • "According to a recent Gallup Poll, 94% of franchise owners are successful, averaging $124,290 in pre-tax profits";
     
  • "A recent independent survey showed that franchise owners enjoy an incredible 94 percent success rate and average income of more than 124 thousand dollars"; and
     
  • "If you buy a Franchise Business, your chances of success are 94%! THAT'S A FACT, according to a recent Gallup poll. Conversely, it's estimated that only 35% of independent business start-ups survive 5 years."


Through the use of such statements, the FTC alleged, Blenheim has represented that it possessed and relied upon a reasonable basis to substantiate the success rate and earnings claims, when in fact, Blenheim did not. The complaint alleges that this representation was false and misleading.

In addition, the complaint alleges, the actual results of the Gallup poll do not support the claims made by Blenheim in advertisements promoting the International Franchise Expo.

The proposed consent agreement to settle the charges, announced today for a public comment period, would prohibit Blenheim from misrepresenting the sales, income or profits that prospective franchise owners have earned or can or will earn; or the chances of success or success rates of franchise owners, unless it possesses and relies upon competent and reliable evidence, which when appropriate must be competent and reliable scientific evidence, to support the claims.

Further, in connection with the advertising, promotion or marketing of any franchise show, Blenheim would be pro hibited from misrepresenting the validity, results, contents, conclusions, or interpretations of any survey, test, poll or study.

Additionally, Blenheim would be required -- for the next five years -- to distribute a copy of the FTC's consumer education publication titled "A Consumer's Guide to Buying a Franchise" to as many as 500 people attending each trade show the company promotes. Blenheim would be responsible for the costs incurred in reproducing and distributing the brochure. The booklet will advise consumers about their obligations as a franchise owner, how to shop for franchise opportunities, and the right questions to ask before investing.

The Commission vote to accept the proposed consent agreement for comment was 5-0.

The proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comment should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in civil penalty of $10,000.

Copies of the complaint, consent agreement, an analysis of the agreement to aid in public comment, as well as copies of "A Consumer's Guide to Buying a Franchise," are available from the FTC's Public Reference Branch, Room 130, at the above address; 202-326-2222; TTY for the hearing impaired 202-325- 2502. To learn the latest FTC news as it is announced, call the FTC's NewsPhone at 202-326-2710. FTC news releases and other materials can be found on the Internet at the FTC's World Wide Web site at http://www.ftc.gov

(FTC File No. 932 3219)

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