Consumer Alert
Franchise Fundamentals: Reducing the risks – and reporting if things go awry
By
Lesley Fair
Senior Attorney, Division of Consumer and Business Education, FTC
September 5, 2023
Image
We’ve all heard the adage “Proper preparation prevents poor performance.” It’s been attributed to everyone from Vince Lombardi to Secretary of State James Baker. As we’ve discussed in the first four installments of our Franchise Fundamentals series, proper preparation – including a thorough pre-commitment investigation into the franchise – may help reduce the risk of painful problems later. But what if a franchisee is concerned that a subsequent business breakdown could be due to a franchisor’s precarious promises? Report it to the FTC through a dedicated link just for franchise issues.
The decision to buy a franchise may be the biggest financial commitment people make in a lifetime. But like a hasty Vegas wedding or a sight unseen home purchase, quick decisions can have devastating consequences. Ponder and pause. If a franchisor puts any pressure on you to rush your decision, that fact alone should be enough to cross them off your list.
Give yourself time to gather information from a wide variety of sources. Contact the Better Business Bureau, your state Attorney General, and the Attorney General in the state where the company is headquartered. Among your most valuable sources of information are existing and former franchisees, but don’t settle for superficial chat. Come to the conversation with a list of questions and probe them for in-depth details about their experience. Even the most successful franchisees experience some business bumps, so make it clear you want the unvarnished truth. If you can’t find current or former franchisees willing to speak candidly with you, that should raise a red flag.
So what if you researched the opportunity thoroughly, signed on the dotted line, and gave it your best effort – but you have evidence that the franchisor didn’t give you the straight story or in some other way engaged in deceptive or unfair practices? Approach the franchisor directly to try to address your concerns. If that doesn’t work, explore your legal options.
Another important step: Report your experience to the FTC. Use this special link to go directly to an FTC page created to collect information related to franchises. Here’s where that link will take you:
Image
You also can visit ReportFraud.FTC.gov and click the dark blue Report Now button.
Image
From there, choose the Job, investment, money-making opportunity, franchiseoption.That will open a menu where you can select Franchise. Click Continue and start by telling us Details about the franchisor and Comments about your experience.
Image
The FTC can’t conduct individual negotiations between you and the franchisor, but the information you report is important to investigatory efforts by the FTC and law enforcement partners.
Looking for more fundamentals about franchising? Keep A Consumer’s Guide to Buying a Franchise at your fingertips. Franchisors and others in the business should consult compliance resources on the FTC’s Franchises, Business Opportunities, and Investments portal. And read the entire Franchise Fundamentals blog series:
- Franchise Fundamentals #1: Debunking five myths about buying a franchise
- Franchise Fundamentals #2: Researching franchise opportunities
- Franchise Fundamentals #3: Taking a deep dive into the Franchise Disclosure Document
- Franchise Fundamentals #4: Considering, calculating, and consulting
- Franchise Fundamentals #5: Reducing the risks – and reporting if things go awry
__________________________________________________________________________________________
Business Blog
FTC says this Dude didn’t abide – by the law, that is
By
Lesley Fair
September 11, 2023
In the words of Jeff Bridges’ character in the cult classic The Big Lebowski, “I’m the Dude or His Dudeness or Duder or El Duderino, if you’re not into the whole brevity thing.” He’d also probably answer to Hey Dude, which – ironically enough – is the name of a shoe company that just settled an FTC action for $1.95 million for alleged violations of the FTC Act and the Mail, Internet, or Telephone Order Merchandise Rule. What’s more, the complaint charges that Hey Dude Shoes posted five-star consumer reviews on its website, but didn’t publish less favorable reviews. To paraphrase The Dude, “This suppression will not stand.”
Hey Dude advertises its shoes on its own website and via social media, making express claims about how quickly it would ship products. In some ads, Hey Dude promised, “All orders placed Monday-Thursday are processed and shipped within 1 business day. Orders placed Friday afternoon-Sunday will be processed the following Monday.”
But according to the FTC, Hey Dude engaged in a host of illegal fulfillment and refund practices. Among other things, the complaint alleges that in numerous instances:
- Hey Dude didn’t honor its shipping promises;
- When items weren’t going to ship on time, Hey Dude failed to clearly offer buyers the option of either consenting to the delay or cancelling their order and getting a prompt refund, as required by the Mail, Internet, or Telephone Order Rule;
- When Hey Dude didn’t ship on time, rather than refunding the purchase price to consumers’ original form of payment, Hey Dude gave some of them gift cards that could be used only on the Hey Dude website; and
- Hey Dude didn’t maintain records sufficient to provide consumers with notification of shipping delays, issue prompt refunds, or otherwise assure Rule compliance.
The FTC also alleges that Hey Dude engaged in deceptive practices regarding consumer reviews. A statement at the bottom of each product page claimed to feature “Real, unedited reviews from HEYDUDE fans” and included ratings on a five-star scale. Hey Dude used a third-party online product review management interface that allowed it to post five-star reviews automatically, but held lower-starred reviews for individualized review. According to the complaint, through June 2022, Hey Dude held, rejected, or didn’t publish more than 80% of their one-, two-, and three-star reviews. Indeed, until June 2022, the company had a written policy instructing its staff to publish certain types of reviews only if they were positive in nature. Therefore, the company allegedly violated the FTC Act by falsely representing that the product reviews on its website accurately reflect the views of all buyers who submitted reviews of Hey Dude products to the site.
In addition to the $1.95 million financial remedy, the proposed court order bars future violations of the Mail, Internet, or Telephone Order Rule. It also prohibits Hey Dude from making misrepresentations about consumer reviews and requires the company to publish all reviews it receives, including those it previously withheld from publication. (The order includes a limited exception for content moderation to screen out reviews that contain profanity, discriminatory statements, the disclosure of personal information, or certain sensitive commercial or financial information.)
What can other companies take from the FTC action in this case? We again turn to The Big Lebowski for compliance wisdom.
“This is bowling. There are rules.” And there are also rules for how companies must honor their shipping and fulfillment responsibilities. The Mail, Internet, or Telephone Order Rule spells out the requirements with specificity. But what if a company experiences delays in the supply chain? The Rule anticipates that sometimes – to paraphrase The Dude – glitch happens and explains the options companies must offer consumers to stay on the right side of the law.
“They did not receive the money. This is our concern, Dude.” It’s the FTC’s concern, too, when consumers don’t receive prompt refunds or when companies give gift cards – rather than real refunds – in response to unshipped orders.
“Strikes and gutters, ups and downs.” Truthful product reviews are highly material to consumers, but let’s face it: There will be customers who love a company’s products and services and others who aren’t so happy. It’s a mistake for companies to solicit reviews and then cherry pick just the good ones for publication. The better response to those “gutters” and “downs” is to use them to improve your products and processes – and earn those five-star reviews the non-deceptive way.
“This isn’t a very complicated case. You know, with a lotta ins, a lotta outs, lotta what-have-yous.” The FTC offers to-the-point materials to help streamline your compliance obligations.The Business Guide to the FTC’s Mail, Internet, or Telephone Order Merchandise Rule gives step-by-step advice for dealing with fulfillment and shipping issues. Soliciting and Paying for Online Reviews: A Guide for Marketers, FTC’s Endorsement Guides: What People Are Asking, and other resources on the FTC’s Endorsements, Influencers, and Reviews portal can help keep your consumer review practices compliant.
Because when it comes to protecting consumers from deceptive or unfair practices, the FTC abides, Dude.
Tags:
- Consumer Protection
- Bureau of Consumer Protection
- Advertising and Marketing
- Endorsements, Influencers, and Reviews
- Online Advertising and Marketing
- Advertising and Marketing Basics
____________________________________________________________________________-
Consumer Alert
Hey Dude Shoes doesn’t walk the walk on shipping and refunds
By
Alvaro Puig
Consumer Education Specialist
September 11, 2023
I don’t know about you, but if I bought something online and never got it, and then didn’t get my money back, I’d be like, “Dude, that’s not right.” The FTC says that’s not right, either.
The FTC alleged that Hey Dude Shoes failed to send customers their product in the time it promised — or at all. What’s more, the company didn’t immediately refund customers their money. In doing so, it violated Mail, Internet, or Telephone Order Merchandise Rule. The FTC also says the company hid from customers reviews with fewer than four out of five stars, which is against the law.
To make it right, Hey Dude Shoes must pay $1.95 million dollars to refund customers their money — it also must stop hiding unfavorable customer reviews.
The Mail, Internet, or Telephone Order Merchandise Rule applies to most things you buy online. Here’s the upshot of the rule:
- Sellers must ship your order when they say they will. If there’s a delay, they must tell you and give you two options: 1) agree to the delayed shipping or 2) cancel and get a refund.
- If you choose a refund, the refund must go back to the original form payment. The seller can’t give you a gift card or store credit.
To learn more about your rights, read What To Do if You’re Billed for Things You Never Got, or You Get Unordered Products and How To Evaluate Online Reviews.
Topics
ShoppingLeave a comment
_______________________________________________________________________________________-
Consumer Alert
Pay your student loans — not scammers
By
Ari Lazarus
Consumer Education Specialist, FTC
September 14, 2023
Image
You’ve probably heard the news — federal student loan repayments are starting again in October. But scammers might try and tell you they can help you avoid repayment, lower your payments, or get your loans forgiven — for a price. Here’s how to spot and avoid these scams.
The most important thing to know is this: the best source of information on your federal student loans is Federal Student Aid. Also, you don’t need to pay to sign up for any programs to lower your payments or get forgiveness — it’s all free at StudentAid.gov/repay. And you can do it yourself. (Again: for free.)
Worried about repaying your loans? The calls and texts that offer “help” might be tempting. But before you act, know how to spot the scams:
- Don’t give away your FSA ID login information. Anyone who says they need it to help you is a scammer. If you share it, the scammer can cut off contact between you and your servicer — and even steal your identity.
- Don’t trust anyone who contacts you promising debt relief or loan forgiveness, even if they say they’re affiliated with the Department of Education. Scammers try to look real, with official-looking names, seals, and logos. They promise special access to repayment plans or forgiveness options — which don’t exist. If you’re tempted, slow down, hang up, and log into your student loan account to review your options.
As you get ready for repayment, here are some steps to take:
- Update your contact information with FSA and your loan servicers. This way, you’ll get timely updates about your repayment plans.
- Enroll in a repayment plan. Use FSA’s Loan Simulator to estimate your monthly payments and compare your repayment options. If you’ve defaulted on your loans, look into the Fresh Start program.
If you spot a scam, the FTC wants to hear about it: ReportFraud.ftc.gov.
Search Terms
Topics
Scams
Student Loan and Education Scams
______________________________________________________________________________
Consumer Alert
Pay your student loans — not scammers
By
Ari Lazarus
Consumer Education Specialist, FTC
September 14, 2023
Image
You’ve probably heard the news — federal student loan repayments are starting again in October. But scammers might try and tell you they can help you avoid repayment, lower your payments, or get your loans forgiven — for a price. Here’s how to spot and avoid these scams.
The most important thing to know is this: the best source of information on your federal student loans is Federal Student Aid. Also, you don’t need to pay to sign up for any programs to lower your payments or get forgiveness — it’s all free at StudentAid.gov/repay. And you can do it yourself. (Again: for free.)
Worried about repaying your loans? The calls and texts that offer “help” might be tempting. But before you act, know how to spot the scams:
- Don’t give away your FSA ID login information. Anyone who says they need it to help you is a scammer. If you share it, the scammer can cut off contact between you and your servicer — and even steal your identity.
- Don’t trust anyone who contacts you promising debt relief or loan forgiveness, even if they say they’re affiliated with the Department of Education. Scammers try to look real, with official-looking names, seals, and logos. They promise special access to repayment plans or forgiveness options — which don’t exist. If you’re tempted, slow down, hang up, and log into your student loan account to review your options.
As you get ready for repayment, here are some steps to take:
- Update your contact information with FSA and your loan servicers. This way, you’ll get timely updates about your repayment plans.
- Enroll in a repayment plan. Use FSA’s Loan Simulator to estimate your monthly payments and compare your repayment options. If you’ve defaulted on your loans, look into the Fresh Start program.
If you spot a scam, the FTC wants to hear about it: ReportFraud.ftc.gov.
Search Terms
Topics
Scams
Student Loan and Education Scams
__________________________________________________________________________
Consumer Alert
Blurred ads and kids and teens: What to know
By
Amy Hebert
Consumer Education Specialist
September 14, 2023
Have kids or teens? If they’re online or using apps or game consoles, they’re also dealing with ads. Sometimes they’ll know it. But what happens when the line between ads and games and other content gets blurred?
Sometimes it’s a teen not realizing their favorite influencer was paid to feature a product. Or a kid not knowing a company is behind that video of a kid unboxing a new toy. Or it’s an ad woven into the gameplay in an online game or virtual reality world.
A new FTC Staff Perspective, Protecting Kids from Stealth Advertising in Digital Media, takes a closer look at these kinds of ads, and includes some of the main takeaways from an October 2022 FTC workshop where experts looked into the potential harms of blurred advertising and discussed possible solutions. Among other things, research presented at the workshop showed that many kids and teens can’t always tell something is an ad if it’s blended into surrounding content.
The bottom line for the FTC? Parents shouldn’t have to go this alone. Businesses, influencers, and anyone else involved in marketing to kids and teens online should make the difference between ads and content crystal clear. FTC staff recommend a clear separation between content and ads, disclosures and icons to flag advertising, and education for kids, parents, and teachers. Platforms should consider policies, tools, and controls to address blurred advertising, too.
Check out the Staff Perspective and recommendations to find out more.
___________________________________________________________________________________-
Business Blog
Sharpening the focus on blurred advertising aimed at kids: Staff Perspective suggests a comprehensive approach
By
Lesley Fair
September 14, 2023
Businesses, platforms, social media influencers, and others who advertise or promote products to children online all have a role to play in ensuring that the boundary between advertising and entertainment is clear to children. Based in part on the insights from the 2022 FTC workshop, Protecting Kids from Stealth Advertising in Digital Media, that’s a key component of the 360° approach recommended in a just-published FTC Staff Perspective about protecting kids from blurred advertising.
The Staff Perspective addresses several key questions: What’s the current digital landscape for kids? What is blurred advertising and where do kids encounter it? What does emerging research tell us about kids’ abilities to recognize and evaluate blurred advertising? What are key concerns about blurred advertising?
Participants at the workshop discussed the immersive nature of advertising to kids online, including blurred advertising. It’s everywhere children go, from gaming platforms and “kidfluencer” video channels to social media feeds of kid-friendly characters. Panelists and other experts also confirmed what others have observed: Younger children have yet to develop the skills or cognitive defenses to detect advertising that is blurred with entertainment or educational content.
The potential for harm associated with blurred advertising is significant. You’ll want to read the Staff Perspective for details, but concerns include manipulation by marketers, intrusive data collection, and financial losses due to accidental or emotional purchases. Add those risks to what experts like the U.S. Surgeon General are already telling us about screen addiction and mental health issues associated with increased online time and the potential injury to kids is alarming.
Do parents have an important role to play? Of course. But according to the Staff Perspective, “plac[ing] the burden entirely on parents to protect their children from these harms” ignores the monumental changes to the digital ecosystem that have made a simple “No TV on school nights”-style approach impractical. Keeping a roof over kids’ heads and food on the table is already a challenge – to say nothing of scrutinizing every screen a kid sees throughout the day and staying ahead of every behind-the-scenes digital marketing method that targets children. As the Staff Perspective notes, “[E]ven if parents could magically monitor the vast majority of their kids’ time online, it would be nearly impossible for them to keep up with the ever-changing technology and digital landscape.”
As the Staff Perspective establishes, “In this moment, it is clear that inaction is not an option.” So what’s to be done? The Staff Perspective suggests that only a comprehensive approach can protect children from the harms of blurred advertising – and that any solution should consider these components:
- Don’t blur advertising. There should be a clear separation between kids’ entertainment and educational content and advertising, using formatting techniques and visual and verbal cues to signal to kids that they’re about to see an ad.
- Provide prominent just-in-time disclosures. Disclosures should be provided when the product is introduced and should be conveyed orally and visually to explain the commercial nature and intent of the message. And let’s be clear: Fleeting superimposed text, fine print, and inscrutable legalese won’t suffice. We’re talking about methods designed to change children’s perspectives of what they see.
- Create icons to flag advertising. Stakeholders should work together to create and implement an easy-to-understand and easy-to-see icon to signal to kids that money or free things were provided to the content creator to advertise the product.
- Educate kids, parents, and teachers. Stakeholders should look for ways to educate kids, parents, and educators about how digital advertising works and to help kids recognize and evaluate it wherever it appears. Education could also play an important role in helping promote and support the use of an icon to help kids identify ads.
- Platforms should consider policies, tools, and controls to address blurred advertising. Platforms should consider implementing policies and tools that would require content creators to self-identify content that includes advertising. They also should consider parental controls that allow parents to limit or block their kids from seeing that content.
Of course, the FTC will be monitoring this area and may take law enforcement action when blurred advertising is an unfair or deceptive practice prohibited by the FTC Act.
Tags:
