QUESTION
Is a franchiser required to tell you why you were denied for a franchise with their company?
Asked on Jan 10th, 2012 on Franchise Law - New Jersey
More details to this question:
I applied to become a franchisee with a company, and was denied. The franchiser sent an email that indicated the reason for my denial was in part from the information received from Verified Credentials Inc. the franchise screening vendor. The email proceeded to say that in accordance with the Fair Credit Reporting Act, you have previously received a copy of this information and a copy of my rights under the ACT. I have not received anything regarding this info from the franchise. When I contacted Verified Credentials they informed me that no background check was ever do on me by this company.
I see an inquiry on my Transunion credit report on May 23, 2011. I applied in May and was given an ok to do the franchise, given the FDD agreement, found a site completed the site survey and was then told I was rejected on January 6,2011. I am very interested to know why I was first approved and then denied, and provided with inaccurate information regarding the reason for my denial.
1 ANSWER
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There are no state or federal laws requiring a franchisor to tell a franchisee why the franchisor was denied a franchise. The franchisor may do business with anyone that it wants to do business with and may reject a person's application for any reason. However, the franchisor has to follow the standards it set out in the Franchise Disclosure Document and in the Franchise Agreement for returning or not returning the franchise fee or any other fee the applicant previously paid to the franchisor.
Verified Credentials, Inc. is not a credit rating agency. It appears from your question that this company performed investigation services for the franchisor, but they must have requested your credit report from Transunion, which is a credit reporting agency. You can obtain a copy of your credit report from Transunion, Equifax or Experian, and any of these three agencies will tell you what inquiries have been made on your credit report.
I am an attorney licensed to practice law in the State of Ohio and I am not admitted to practice law in the State of New Jersey. This answer is intended to give general legal information and does not constitute legal advice on your particular situation. No attorney client relationship is created by my answer to your question.
Answered on Jan 27th, 2012 at 2:58 PM