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Is the IFA Good for Franchisee Due Diligence?

The State of Washington is a registrant state for franchising.

"Franchise" is defined in RCW 19.100.010(4) as:

(a) An agreement, expressed or implied, oral or written, by which:

(i) A person is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan prescribed or suggested in substantial part by the grantor or its affiliate;

(ii) The operation of the business is substantially associated with a trademark, service mark, trade name, advertising, or other commercial symbol designating, owned by, or licensed by the grantor or its affiliate; and

(iii) The person pays, agrees to pay, or is required to pay, directly or indirectly, a franchise fee.

Franchisors must register their franchise offerings prior to offering in Washington, unless the offering qualifies for one of the exemptions contained in RCW 19.100.030.

I thought it would be interesting to review how many actions that Washington State took against unregistered franchise systems and whether the unregistered franchise systems were IFA members.

I was somewhat surprised by the results - more on that later.

In 2007, there were a total of ten actions taken against unregistered franchise systems. (Interestingly there were only three actions taken against unregistered business opportunity sellers, Costal Publications, Interlake Chemicals, and Holiday Enterprises.

Washington State took action against:

1. JoAnn Jagroop and Coffee Time;

2. High Touch Investment Corporation;

3. United Business Solutions dba UBS Group, Inc.; Johnathan Ahlf;

4. Keep Rockin’ LLC and The Wedge Corporation;

5. EZ Show, Inc., Bernie Day, and Gordon L. Powers J;

6. Baby Boot Camp, LLC;

7. Total Golf Adventures Franchise, LLC and Teen Golf Adventures;

8. The Blind Guy, Inc;

9. Fenco USA, Inc., Ui Sup Lee;

10. Mark Hopkins and Paulina Hopkins dba All American Decal Guy, All American Decal Guy, LLC, Mark Hopkins, Paulina Hopkins.

No real patterns to the businesses, coffee, decal, tax recovery, and others.

Now, I was slightly surprised that none of these outfits belonged to the IFA, but I suppose that I am showing my cynicism here.

But, I wonder if that is a good rule for being on the Franchise Whack list: not being an IFA member?

Of course there are all sorts of IFA members that are worthless franchise systems.

I think that it is unlikely that the IFA screens it members for their UFOCS, so is it just a big coincidence that these ten non registered franchise systems are not members of the IFA?

What do you think?

Full post as published by Misleading Advertising Law on January 28, 2008 (boomark / email).