AKRON-The Latin warning caveat emptor-``Let the buyer beware''-certainly holds true for individuals considering the purchase of a franchise. Disagreements do arise, as between Marvin Kiehm, former owner of Tualatin Tire & Auto Inc., a Goodyear franchise in Tualatin, Ore., and the tire maker. And when they do, they often end up in a courtroom.
After reviewing the background of the case, attorney Keith J. Kanouse, a noted franchise law litigator from Boca Raton, Fla., had some simple advice for potential franchisees:
``Get a copy of the franchiser's master lease so you know exactly what your obligations are;'' and
``Make sure your sublease is the same as the master-a lot of times there will be an administrative fee imposed,'' as was the bone of contention in the Tualatin case.
Mr. Kanouse said ``fraud'' occurs when a franchiser is knowingly untruthful to a franchisee in the sale of a franchise.
He doesn't believe the Oregon Supreme Court's decision upholding a ruling of fraud against Goodyear is ``fatal'' to the tire maker, nor will it necessarily set a precedent in other states. ``It doesn't mean that they can't sell franchises anymore.''
But ``they need to better operate properly and to make sure that they disclose exactly if there are any changes between the terms of the master and sublease.''
It also means that, according to Federal Trade Commission regulations and franchise disclosure laws in a number of states, Goodyear is obligated, for the next 10 years, to disclose the litigation in its franchise offering circular to all prospective franchisees.
A common error on the part of persons considering a franchise is failure to be represented by counsel during the process, Mr. Kanouse noted.
``They're committing tens, if not hundreds of thousands of dollars to buy this, yet they don't want to spend (any money) to get adequate legal counsel.''
Mr. Kanouse also said that while franchise fraud is not widespread, he sees a far greater prevalence of fraud in the area of business opportunities, mostly by companies making exaggerated earnings claims to prospective investors or franchisees.
Marc P. Seidler, a partner in the Chicago law firm of Rudnick & Wolfe, specializing in the areas of franchising and distribution, agrees it's doubtful the Tualatin Tire case will set a precedent. He said it is a fairly common business practice for a franchiser to impose a surcharge on top of the sublease.
``Goodyear's problem seems to be that they didn't adequately disclose what I suspect in the real world would be perfectly acceptable terms to any prospective franchisee.''
Nonetheless, he advises franchisees to insist on seeing a copy of the master lease, because that's where they'll find their rights spelled out.
The case is more of a warning to Goodyear that it has to ``exercise some greater caution in their disclosure practices to prospective franchisees,'' he said.