Why Non-Disclosures (NDAs) Should be Outlawed in Franchising Pt. 1
If the FTC requires franchisors to provide DISCLOSURE documents to prospective franchisees, what are they hiding by using NON-DISCLOSURE agreements (NDAs)? Veteran franchisee Jim Lager explains why NDAs should be banned in franchising. Part 1 –
Part of the Why Smart People Fail Series by Jim Lager with Sean Kelly
Franchisors are looking for people who follow direction & respect the chain of command – attributes of many veterans.
Good franchisors with refined, proven systems value rule-followers because deviations from that system will diminish the franchisee’s performance and chance for success.
But not-so-good franchisors (& there are many) simply don’t want to be questioned… often because their practices are questionable. They want their directives followed no matter how unfair or self-serving.
They want anyone who question them or speak out to be silenced.
What’s an NDA (non-disclosure agreement)?
Their prime tool for maintaining this silence is what’s called the Non-Disclosure Document, or NDA. It’s an agreement that strips franchisees of their freedom of free speech & threatens them with severe legal and financial consequences if they share their experiences or honest opinions.
The most obvious NDAs are those franchisees are forced to sign when they leave the system.
These NDAs go far beyond protecting trade secrets or confidential information. They prohibit sharing any fact or opinion that might contradict the franchisor’s tightly controlled marketing presentation. Often, the franchisee is not even allowed to mention that they were a franchisee!
The CIA has less stringent requirements than some franchisors!
NDAs Perpetuate Predatory Practices Against Veterans
If a franchisor falsely brags and advertises that its franchise is popular and beloved by military veterans, current and former franchisees who are military veterans are prohibited from sharing their opinions or warning their fellow brothers and sisters from signing a 10 or 20 year agreement based on false pretenses.
It’s outrageous that military veterans – who sacrificed for our freedom of speech – are stripped both of their freedom to make informed franchise buying decisions and stripped of their right to share what happened after they signed their franchise agreement.
Since Bad Franchisors Are Allowed to Hide Predatory Practices, they Have no Reason to Change.
The pressure of public accountability is a critical motivator that drives businesses to improve.
The success of products from movies to cars to thousands of items on Amazon will thrive or die depending on their consumer reviews. This creates a major motivation for companies to deliver quality products & great service. That’s the American system of business.
But bad franchisors are allowed to continue their bad practices and ruin lives through the secrecy afforded by Non-Disclosure Agreements (NDAs), Mandatory Arbitration & General Releases.
It’s time we start protecting those who protected us – our veterans – & reinstate their rights.
ABOUT JIM LAGER
Jim Lager’s franchise experience spans 4 decades with 3 national brands. He is now a proud Non-Franchised American (NFA) & independent owner of Texas Hose Pro.
Why Smart People Fail is a publishing collaboration with Sean Kelly & IdeaFarm
“Why Non-Disclosures (NDAs) Should be Outlawed in Franchising Pt. 1” (PDF)
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Or maybe non-disparagement clauses like this in Dickey’s Franchise Agreement. It doesn’t matter if what you say is true!
“D. Neither you nor your Owner/Operator nor any of your Investors shall publish or communicate in any way (or assist, encourage, or support) to any third party any statement that might reasonably be construed to be disparaging, defamatory, derogatory, negative, or critical of the personal or business reputation, acumen, skill, practices, or conduct of Dickey’s, its subsidiaries, or affiliates, including each party’s respective officers, directors or employees, in connection with this Agreement or any prior agreement between the parties and the purchase and operation of any Dickey’s Barbecue Pit® Restaurant and franchise. With regard to this provision, the person alleged to have violated this provision agrees to waive his/her rights to prior restraint on speech and consents to the issuance of a temporary restraining order, temporary injunction, or other available injunctive relief designed to prevent any further breach of this provision. Additionally, if you or your Owner/Operator or any of your Investors publish or communicate any statement to a third-party that is disparaging, defamatory, derogatory, negative, or critical of the personal or business reputation, acumen, skill, practices, or conduct of Dickey’s, its subsidiaries, or affiliates, including each party’s respective officers, directors or employees the other party, you and your Owner/Operator and your Investors agree to assign all copyrights to such publications or communications to Dickey’s. You and your Owner/Operator and your Investors agree to take whatever action (including signing assignment or other documents) that Dickey’s requests to evidence its ownership or to help Dickey’s obtain intellectual property rights in the copyrights to such publications or communications.”