In BUYING A FRANCHISE VERSUS STARTING AN INDEPENDENT BUSINESS, attorney and franchisees expert witness Kevin B. Murphy writes:
AVOID ILLEGAL DISGUISED FRANCHISES CALLED A LICENSE An increasing number of unscrupulous companies that don’t fly straight or play by the rules are selling licenses that are really disguised, illegal franchises. Instead of providing a comprehensive FDD Franchise Disclosure Document that meets stringent federal and state legal requirements, these companies go a different route. They present a “license agreement” or a distributor agreement” with no disclosures, no audited financial statements, no background of the principals, no investment requirement details, etc. The franchise versus license situation is one that I often consult on as a franchise expert, after clients have lost their life savings, retirement accounts, etc. investing in a license or distributorship that is an illegal disguised franchise. Don’t go down this dangerous path.