The Fair Trade Commission (FTC) on Friday fined an egg roll maker for not disclosing important information to franchisees and urged people who are considering starting a franchise to look closely at the contract.
The FTC on Friday announced it had fined egg roll maker Nake Roll NT$50,000 for failing to disclose important franchise information 10 days before the franchise began operations.
The company failed to disclose information, such as the date the franchise was to open for business, the previous experience of management staff in running franchises, the performance records of previous franchises and the background and professional experience of the company managers, commission Vice Chairperson Shih Hui-fen (施惠芬) said.
Shih said that without such essential information people who are considering buying into a franchise can only make a limited assessment of the costs associated with joining the business.
The company’s advertisement to franchisees provides little information beyond “low cost,” “high profit,” “easy to start business” and “quick to break even,” the FTC said.
Contrary to what Nake said in its advertisement, franchisees were expected to cover expenses related to establishing stores, from franchise fees to raw materials, all of which was not clearly stated prior to purchasing a franchise.
The commission said the lack of full disclosure had hampered the ability of potential franchisees to make an informed decision and the company was therefore in violation of the Fair Trade Act (公平交易法).
The FTC urged those who are considering buying into a franchise to examine the contract and the information provided carefully, such as the rights and requirements of the franchisee. Companies should also ensure they disclose important information, such as any costs that may be incurred and the distribution of franchises to avoid overstepping the law.
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