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A report issued by the U.S. General Accounting Office (GAO) said that the Federal Trade Commission (FTC) is effectively enforcing its regulation that protects those who invest in franchised businesses, such as convenience stores and fast-food restaurants.
The GAO report noted that over the seven-year period from 1993 to 1999, only 20 cases involving franchises were determined serious enough by the FTC to warrant court action. The agency obtained some form of relief for investors in all cases.
"The GAO report confirms what we've known for some time-that there are no systemic problems with franchising that require government solutions," Don DeBolt, president of the International Franchise Association (IFA). "The franchising sector is doing a very effective job of self regulation and the Federal Trade Commission is enforcing the Trade Regulation on Franchising and Business Opportunities."
DeBolt said the report also reassures Congress that there is no need for federal legislation to regulate relationships between franchisees and franchisers.
IFA, a trade group that represents both franchisees and franchisers, was founded in 1960 to promote good franchising practices that protect those who pursue small-business ownership through purchasing a franchised business.
"According to FTC staff, data the FTC has collected, while limited, suggest that franchise relationship problems are isolated occurrences rather than prevalent practices," the GAO report stated.