Question: Wolf King and others sold business opportunities in vending machines
Wolf, King, and others sold business “opportunities” in vending machines by taking out ads in newspapers throughout the country. When individuals responded, telemarketers called "fronters" would tell them of false earnings estimates, and those who could afford $16,000 to $25,000 for vending machines were turned over to "closers" who promised wonderful results. References were provided who were "shills"- they did not own vending machines but were paid to tell "stories" that were monitored by Wolf, King, and other supervisors. None of the individuals was given franchise disclosure documents. King induced one investor to mortgage her house so that she could pay $70,000 for a number of vending machines. In three years Wolf, King, and others took in some $31.3 million. The FTC alleged that the defendants violated the FTC franchise disclosure rule. Is there a franchise disclosure rule violation if Wolf and King were merely selling vending machines? What if Wolf and King promised exclusive territories for the machines? Why would a franchise disclosure rule be necessary in this case? Decide. [FTC v. Wolf, Bus. Franchise Guide ¶ 27,655 (C.C.H. D. Fla.)]
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