The booming popularity and growth of franchising in the 1950s and 1960s brought during the late 1960s increasingly frequent franchisee complaints of abuses by franchisors. By the latter half of the 1960s, franchisors started popping up who were more focused on selling franchises than on operating sound franchise businesses.
Salesmen began to make misrepresentations and promises to attract franchisees; some based their sales efforts on the use of celebrity names and endorsements; and some became “franchise sale focused’, rather than “franchise operations focused.” Some even sold franchises for concepts that didn’t exist. In some situations, representations of expected gross or net income had been vastly exaggerated.
The roaring profits to franchisors, and oft-repeated stories of franchisees who “struck it rich” through franchising were accompanied by the abuse of that system by a few fly-by-night, unethical and, often, criminal operators.
Futuristic Foods, Holiday Magic, and other such scams were horror stories resulting in the loss of peoples’ life savings invested in what they thought were businesses which would provide them the entrepreneurial success they dreamed of, but which instead turned out to be schemes to defraud.
Adding to the discontent was the emergence of the celebrity backed franchises in the late 1960s, franchises for which the celebrities had done little more than lend their names or appearances. Johnny Carson, Edie Adams, and Mickey Mantle testified in January 1970 before a highly publicized Senate hearing on franchising. Other celebrities were hired to publicize franchises: some include Tony Bennett, Eva Gabor, Ed McMahon, Jerry Lewis, Fats Domino, Rocky Graziano, Roy Rogers, James Brown, and Willie Mays.
By Steve Longo and Jim Notaris