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MAJOR STUDY ON FRANCHISE 'SUCCESS/FAILURE' PRESENTED TO CONGRESSIONAL COMMITTEE

 MAJOR STUDY ON FRANCHISE 'SUCCESS/FAILURE' PRESENTED
 TO CONGRESSIONAL COMMITTEE
 /ADVANCE/ WASHINGTON, June 17 /PRNewswire/ -- Jeffrey E. Kolton, president of FRANDATA Corp., a company which specializes in franchise research, analysis and document retrieval, presented a major new study today on franchise termination rates to the House Small Business Committee.
 Contrary to the reported claims of high rates of franchise failures, Kolton's study, based on the actual disclosure documents that franchise companies must file with state government agencies, revealed that an average of only 4.42 percent of franchisees leave a franchise system on an annual basis.
 The "FRANDATA Franchise Termination Report," based on a comprehensive review of the disclosure documents of 584 of the nation's leading franchise systems, categorized franchisee departures as follows:
 -- 0.619 percent for failure to pay royalties/contractual
 obligations.
 -- 0.092 percent for quality control reasons.
 -- 0.001 percent of contracts were not renewed.
 -- 1.007 percent left for other specified reasons (abandonment,
 bankruptcy, health reasons).
 -- 1.210 percent were canceled, terminated or not renewed (no
 specified reasons).
 -- .556 percent of franchisees were re-acquired by purchase.
 -- .143 percent of franchisees were otherwise re-acquired.
 -- .334 percent were voluntarily terminated.
 -- .455 percent were terminated by mutual agreement between
 franchisee and franchisor.
 In appearing before the House Small Business Committee, Kolton cautioned Congress not to equate the number of franchisees who have "left" the system with business "failures." "Recently published reports about 'failure rates' of franchisees are both misleading and inaccurate," Kolton stated before the committee, "because none of these studies have clearly defined what a 'failure' is." "There are many reasons for even a 'successful' franchisee to leave the system," Kolton continued, "such as retirement, passing a successful operation on to a relative, health reasons unrelated to the business and repurchase of the franchise by the franchisor."
 The FRANDATA study also examined the assertion contained in an earlier report prepared by the House Small Business Committee which noted that "most" franchise agreements include provisions which allow franchisors to terminate, refuse to renew or deny transfer of ownership "without cause." Kolton testified before the committee that, based on FRANDATA's comprehensive review, less than 14.7 percent of franchise agreements currently in use contain such provisions.
 The FRANDATA report revealed that only 4.07 percent of the franchise agreements reviewed allowed franchisors to unilaterally terminate a franchise agreement without cause. The study also found that 6.62 percent of agreements allowed the franchisor to refuse to renew the agreement without cause, where the agreement provides for potential renewal.
 The FRANDATA study further revealed that only 7.30 percent of the agreements gave franchisors the right to indiscriminately refuse to accept a proposed transfer of ownership without cause.
 Kolton pledged to work with the committee to assemble and analyze more data on the franchising field in the coming months, but added that franchise companies should not be criticized "for simply complying with the current disclosure laws that are imposed on them by state and federal regulations."
 Copies of "FRANDATA Franchise Termination Report," including over 7,400 pages of supporting documentation, as well as separate industry reports, are available for purchase from FRANDATA, phone: 202-659-8640, or by writing to: FRANDATA, 1155 Connecticut Ave. N.W., Suite 275, Washington, D.C., 20036.
 -0- 6/17/92/0900
 /CONTACT: Kevin T. Keenan of FRANDATA, 202-659-8640/ CO: FRANDATA Corporation ST: District of Columbia IN: SU:


DC -- DC025 -- 0851 06/16/92 17:12 EDT
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Date:Jun 16, 1992
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