Jared Fogle, dubbed as the former “Subways celebrated pitchman” by USA [http://www.usatoday.com/story/news/nation/2015/08/19/jared-fogle-court/31979091/] has accepted a plea in regarding child sex and porn charges. Not good for public relations. Franchise Disclosures are probably not the first thing on Subway’s mind, but let’s take a look.
The FTC Franchise Disclosure Rule [FTC Rule] and NASAA guidelines [Guidelines] require Franchisors in Item 18 to disclose:
Any compensation or other benefit given or promised to a public figure arising from either the use of the public figure in the franchise name or symbol, or the public figure’s endorsement or recommendation of the franchise to prospective franchisees.
The FTC Rule and Guidelines go on to define who a ‘public figure’ is by saying:
[P]public figure means a person whose name or physical appearance is generally known to the public in the geographic area where the franchise will be located.
The FTC Franchise Rule Compliance Guide [FTC Guide] sites sports stars, actors, musicians and similar celebrities as typical figures.
Read closely, FTC Guide makes one important caveat public figures. It is not just any star or musician generally know. It has to be someone who endorses or recommends the franchise to prospective franchises.
The FTC draws out this distinction by saying:
Item 18 is limited to circumstances when a public figure’s identification with a system is for the purpose of selling franchises. Merely using a public figure as a spokesperson to promote a system’s products or services sold to consumers does not bring a franchisor within the ambit of the amended Rule’s Item 18 requirements.
So in the case of Subway’s requirement to disclose Jared Fogle in their Franchise Disclosure Document [FDD], provided he only promoted the purchasing of subway sandwiches and not the buying of Subway franchises, Jared Fogle would not have been disclosed in the FDD.
Here is a sample of Item 18 provided in the FTC Guide:
Belmont has paid Ralph Doister $50,000 for the right to use his name in promoting the sale of our franchise. This right expires on December 31, 2008. Belmont has produced newspaper ads, a brochure, and a video which feature Mr. Doister. Mr. Doister does not manage or own an interest in Belmont.