Trade Group’s Ad Citing Gallup Survey Angers Pollster

The Gallup Organization is fuming over the way the nation’s largest franchising trade group has used its research. “They traded off our reputation to try to get people to invest in franchises…And that’s a violation of our rules,” says Gallup lawyer Steve O’Brien.

The Wall Street Journal
March 31, 1998

Trade Group’s Ad Citing Gallup Survey Angers Pollster

The Gallup Organization is fuming over the way the nation’s largest franchising trade group has used its research. “They traded off our reputation to try to get people to invest in franchises…And that’s a violation of our rules,” says Gallup lawyer Steve O’Brien.The Gallup Organization is fuming over the way the nation’s largest franchising trade group has used its research. “They traded off our reputation to try to get people to invest in franchises…And that’s a violation of our rules,” says Gallup lawyer Steve O’Brien.**
Dan Morse

Earlier this month, the International Franchise Association ran a nationwide newspaper advertisement touting its Gallup-conducted survey. The ad purported to show how satisfied franchise owners are. “Gallup Survey: 92 Per-cent Franchise Owners Successful,” the ad boasted. IFA faxed out news releases with identical wording to the national media.

When Gallup officials saw the ad, though, they hit the roof. “They traded off our reputation to try to get people to invest in franchises…And that’s a violation of our rules,” says Gallup lawyer Steve O’Brien. “We turn down a thousand requests [for surveys] a year. This year, it should have been a thousand and one.”

The research organization said IFA misrepresented its data because the group didn’t clearly state whom Gallup had surveyed. IFA also dressed up Gallup’s results by inserting its own wording about the types of franchisees involved in the survey. In recent weeks, Gallup has told IFA to can the ad and forced IFA to retract its original news release.

Separately, the matter also has caught the attention of the Federal Trade Commission. “Obviously, we are concerned” and plan to review the situation, says Steve Toporoff, who regulated franchise chains for the FTC and had similar concerns about an IFA trade-show promoter five years ago.

The IFA has played down the incident and says its ad and news release weren’t misleading. Last week, the Washington, D.C., group released a letter it received from Gallup stating that “this problem is now behind us.”

The episode is nevertheless more trouble for the latest IFA-commissioned survey, which was questioned by academics after its March 10 release. The survey, which involved only franchises still operating and not those that had failed, found that 92% of owners considered themselves either “very successful” or “somewhat successful.”

The academics’ response was predictable, since they had questioned IFA surveys for years. But getting Gallup into a froth is another matter altogether.

Mr. O’Brien said his concerns began March 11. During a business trip in Chicago, he noticed a newspaper advertisement bearing the Gallup name boldly proclaimed the successes of franchises. The text began: “Whether they’re serving burgers or bagels, tending to taxes or helping the bereaved select a casket, franchise owners consider themselves successful, according to a Gallup Organization survey released yesterday by the International Franchise Association’s (IFA) Educational Foundation.”

Gallup makes clients sign off on two major agreements: They must accurately portray the results and they must clear any news releases with Gallup. IFA failed on both counts, Mr. O’Brien says.

For its part, IFA acknowledges it never cleared the pronouncements with Gallup. The group received the ad space at no charge from the newspaper in exchange for giving the paper booth space at its annual franchise convention, according to the IFA.

The IFA plays down the spat with Gallup and defends the poll results as a survey of the satisfaction of franchise owners. “They [Gallup officials] didn’t care for the language in the lead paragraph, it’s as simple as that,” says IFA spokeswoman Kara LaGrassa. The group has rewritten its news release, which it cleared with Gallup before sending out. The revised release eliminates references to burgers, bagels and other types of franchises, but the presentation of the survey results isn’t significantly different. That indicates, the IFA says, that Gallup was never concerned with how IFA presented the numbers.

At the FTC, Mr. Toporoff declined to say whether IFA’s original ad was misleading, but says Gallup’s concerns “would be a factor” in its examination of the matter. In 1993, the promoter of an IFA trade who was accused of embellishing an already questionable IFA survey. The promoter eventually agreed to settle an FTC complaint without admitting any wrongdoing.

“This is sort of the second go-around, if you will,” Mr. Toporoff says.

  • * *

FRANCHSIEES AND FRANCHISERS focus on legislation in the heartland.
A proposal in the Illinois Legislature would curtail regulatory authority to demand financial information from franchiser that sell outlets in the state. The measure, which last week passed the state House 115-0, would limit regulators’ scope to nationally recognized disclosure forms. Senate action is pending.

Franchisers say their industry essentially has been ignored by national deregulation movements, so they have stepped up their attack at the state level. In recent years, franchise protections have been softened in Michigan and Wisconsin.

Of the 12 states that review franchisers’ finances, Illinois regulators often take the most time, according to the IFA. (Nation-wide, franchising is regulated by the FTC.) “Illinois is definitely a big problem state,” says IFA lobbyist Greg Smith. “And that’s why we sought changes there.” The IFA says the new law would free up regulators to investigate truly circumspect franchisers.

Another major battleground: Iowa, where pro-franchiser forces are pushing to end the unique protection franchisees have against parent companies opening identical outlets nearby. But as the legislation stands now, these forces have made little progress.

Nationally, protections for franchisees are slipping, says Rupert Barkoff, an Atlanta attorney who has clients on both sides. “The trend has gone two steps backward from a franchisee advocates point of view,” he says.


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Risks: Investments in franchising will stop & be lost if law passed, International Franchise Association, IFA, Necessary illusions, Federal Trade Commission, Frenzied lobbying, Iowa Franchise Investment Act, Success rates fudged, Academic scorn, Misrepresentations, Encroachment (too many outlets in area), Close ties: IFA & CFA, United States, 19980331 Trade group

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