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What to Do When Franchisees are Restricted from Speaking about their Franchise Experience

 

Over the weekend, The New York Times published a scathing article about Amazon’s work culture that described the experiences of current and former employees.  The article has since caused a debate over the issue, eliciting responses from Amazon’s CEO, Jeff Bezos, and many current and former employees who are posting their own experiences on LinkedIn and other websites.  From the article and the subsequent personal posts by current and former employees, it is apparent that employees are more than willing to discuss their work experiences, the good, the bad, and the ugly, in an open dialogue with others.  Similarly, most current and former franchisees are more than happy to discuss their experiences regarding the franchise system in an open dialogue with prospective franchisees.

In the Franchise Disclosure Document (“FDD”), a franchisor is required to provide a list of current and former franchisees, as well as, their contact information.  In order to get a better idea of what it is really like to be a part of the franchise system and whether or not the franchisor provides the support and services as promised in the Franchise Agreement, contacting current and former franchisees is always recommended. However, in some FDD’s you may see the following verbiage:

Franchisees have signed confidentiality clauses during the last 3 fiscal years. In some instances, current and former franchisees sign provisions restricting their ability to speak openly about their experience with the Franchise. You may wish to speak with current and former franchisees, but be aware that not all such franchisees will be able to communicate with you.

Being able to speak with, and meet, current and former franchisees is an invaluable way to gain information to aid you in your decision-making process.  However, if franchisees are restricted from speaking openly with you about their experiences with the system, it can make the task of doing your due diligence a difficult one.  It becomes even more important to try and get as much information as you can from current and former franchisees who are permitted to communicate with you, and to investigate all aspects of the franchise before making a decision.  Therefore, you will want to inquire why some franchisees have signed confidentiality clauses, how many have signed confidentiality clauses, and under what circumstances the confidentiality clauses were signed.  You may not get the answers to these questions, but you will be able to gauge the franchisor’s reactions and the manner in which they address your specific questions and that information may be more telling than the answers themselves.

Stuck on what you should ask the franchisees? Check out Josh’s post for 10 questions to ask before you buy.