In 2000, a U.S. District Court ruled in favor of the franchisees, giving them the right to purchase goods, at lower prices, from alternate suppliers.
Rizer, who owns three Dairy Queen stores in Kentucky, said he reduced his food costs by about 6 percent a year by buying products at lower prices than before.
Johnson and other franchisees view the centerpiece of the FTC Franchise Rule - a requirement that franchisors disclose information about policies and practices in Uniform Franchise Offering Circulars - as ineffective in protecting franchisees.
As proof, the franchisees point at what the FTC tells prospective franchisees on the cover letter of the UFOC.
"To protect you, we've required your franchisor to give you this information. We haven't checked it and don't know if it's correct. It should help you make up your mind. ... If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law."
In 1999 the FTC received 102 complaints involving franchises, down from the 108 it received in 1998, according to a General Accounting Office audit last year.
From 1993 to 1999, the FTC determined that 20 cases were serious enough to warrant court action. That, along with other GAO findings, proved that the FTC is effectively enforcing its rule that protects investors, according to the International Franchise Association.
Still, the GAO report concluded that the "extent and nature of the franchise relationship problems are unknown because of a lack of readily available, statistically reliable information."
Among states, the GAO said, Iowa has the most comprehensive franchise law. However, Brent Appel, a Des Moines attorney, said the statute has been weakened in recent years.
Among the ways that Iowa differs from other states is that it permits a franchisee to sue its franchisor for monetary damages if the franchisor develops an outlet in "unreasonable proximity."
Nebraska's law on franchising leaves virtually all regulation with the FTC's Franchise Rule. Any franchisor who provides a Uniform Franchise Offering Circular to a prospective franchisee is exempt from the state's Seller-Assisted Marketing Plan Act.
Top 10 franchises
The Web site entrepreneur.com ranks franchises according to financial strength, stability, growth rate, number of locations, years of operation, start-up costs, litigation, percentage of terminations and financing arrangements. The top companies, their specialties and their start-up costs:
- •Subway, submarine sandwiches and salads, $63,400-$175,000
•Jackson Hewitt Tax Service, computerized tax preparation and electronic filing services, $47,400-$75,200
•Curves for Women, women's fitness and weight-loss centers, $25,600-$31,100
•7-Eleven Inc., convenience stores, variable
•Yogen Fruz Worldwide, frozen yogurt and ice cream, $25,000-$250,000
•Quizno's Franchise Co., submarine sandwiches, soups, salads, $170,000-$232,200
•McDonald's, hamburgers, chicken, salads, $489,900-$1.5 million
•Management Recruiters/Sales Consult/MRI Worldwide, personnel placement, search and recruiting services, $114,000-$162,200
•Holiday Inn Worldwide, hotels, variable
•Jani-King, commercial cleaning, $8,200-$33,500
