The big bang: how franchising became an economic powerhouse the world over

Entrepreneur,  Jan, 2004  by David J. Kaufmann

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* A CONTINUED INCREASE IN FRANCHISES THAT MEET THE NEEDS OF CHILDREN OF WORKING MOMS: Expect more day-care offerings; specialized classes (from cooking to sports); tutoring and test preparation; and one-stop shopping for teens and preteens featuring clothing, accessories, electronics, music, video and computer programs all in one place.

Even the way franchises are offered and the way franchising is regulated are about to undergo a revolution. The federal government's key franchise regulation, the FTC Franchise Rule, is about to be revised for the first time since its promulgation 25 years ago. Following years of study and public comment conducted under the leadership of the FTC's Eileen Harrington and Steven Toporoff, the new FTC Franchise Rule Will feature expanded disclosure based on the current state-ordained Uniform Franchise Offering Circular format, clarification that the Franchise Rule doesn't apply to pure international transactions, and new exemptions relieving franchisors from having to engage in disclosure with sophisticated franchisees. And, in conjunction With the state administrators who serve on the North American Securities Administrators Association Franchise Project Group, the federal and state governments will soon clear the way for franchise disclosure to be effected almost exclusively through electronic communications--e-mail, franchisor Web sites, CD-ROM and the like. We are fast approaching the day when franchisors will meet new franchisees for the first time either when the contacts are being signed or even later, at the first training session for new franchisees.

Want to see the future right now? Then look to California. Under the leadership of Califor nia Corporations Commissioner Demetrios Boutris and deputy commissioner Timothy LeBas, California is already implementing two future trends. Go to www.corp.ca.gov, click on "California Electronic Access to Securities Information" (Cal-EAS), and you can view and download virtually all California's franchise filings--disclosure documents, notices of exemption, administrative orders and more. Soon to come: California adopting a "risk-based" franchise registration review protocol, which gives closer scrutiny to start-up or problematic franchisors seeking registration than to mature, reputable and well-established franchisors.

IN THEIR MOST RECENT FISCAL YEARS, FRANCHISE 500[R] COMPANIES GENERATED $206.6 BILLION.

SOURCE: Entrepreneur's Franchise 500 2004.

Special Effects

FRANCHISORS SOUND OFF about what's shaped the face of franchising today:

TOP FOUR FACTORS THAT HAVE IMPROVED FRANCHISING:

1. THE INTERNET

2. GOVERNMENT/FTC REGULATIONS

3. THE ECONOMY

4. THE UFOC

TOP FOUR FACTORS THAT HAVE HURT FRANCHISING:

1. STATE AND FEDERAL REGULATIONS

2. LAWYERS/LITIGIOUS SOCIETY

3. BAD FRANCHISORS ENTERING FRANCHISING

4. 9/11

SOURCE: Entrepreneur magazine

New Faces

IN THE PAST 25 years ...

51% OF FRANCHISORS SAY THEIR NUMBER OF WOMEN FRANCHISEES HAS INCREASED.