The franchise industry is excited as the Federal Trade Commission (FTC) is requesting input regarding franchising practices and agreements so they can make changes to the Franchise Rule.
The franchise industry has been quick to weigh in on the proposed changes, with some expressing concerns about the potential impact on franchisor flexibility and innovation. Others have praised the proposed changes as a necessary update to reflect the current state of the franchise industry. As the comment period continues, the franchise industry will closely watch for updates and changes to the Franchise Rule. Franchise lawyers are always up to date with the latest developments, which is why getting in touch with Franchise.Law can be helpful if you are in need of legal assistance regarding franchise regulations.
What Feedback on Agreements and Practices Does the FTC Require?
The FTC is looking for responses on various subjects, including the ability of franchisees to negotiate the terms of their agreements before signing and the justification for certain contract terms in franchise agreements. They also want comments on franchisors’ control over wages and working conditions, payments franchisors receive from third parties related to their purchases, and how franchisee labor cost is affected directly or indirectly, and this includes every cost related to the franchisor business.
Some believe the FTC is addressing pertinent matters related to rebates, control, and unilateral changes that can influence the dynamics between franchisees and franchisors. However, these sources also point out that several of the concerns raised by the FTC are aspects that franchisees should inherently take into account when entering agreements. Moreover, it is anticipated that franchisors should proactively articulate their stance and endeavor to demonstrate the efficacy of the Franchise Rule to the FTC.
The Franchisees’ Response
The American Association of Franchisees and Dealers praised the FTC’s solicitation for public opinions on provisions of franchise agreements and franchisor business practices. The group urged the FTC to examine concerns, including the fairness of contract conditions, post- and presale transparency, and the growth of kickbacks pushing up franchisee expenses.
Keith Miller, the current director of public affairs and engagement for the AAFD, said that the lack of oversight over franchising has paved the way for more “bad actors.” He noted that the FTC’s request for information is significant because it goes beyond the current Franchise Rule and that the FTC has more authority than just the rule itself.
The FTC has been asking for public feedback on the Franchise Rule since 2019 to stop misleading tactics that might harm franchisees and employees. It is also looking for feedback on a regulation prohibiting non-compete agreements for employees in certain circumstances and input on whether the proposed rule should also apply to non-compete agreements between franchisors and franchisees.
Meanwhile, the International Franchise Association has many questions about what the FTC wants to do with these comment requests, saying that the franchising community has become an area of interest to the commission. The group hopes to provide a balanced perspective from both franchisees and franchisors.
Conclusion
Overall, the FTC’s efforts to assess franchising practices are a positive step toward ensuring a fair marketplace for all parties involved. While the franchise industry may face additional scrutiny in the coming years, it is ultimately in everyone’s best interests to address any issues and improve transparency and fairness in franchising practices.
The Federal Trade Commission (FTC) is seeking public input on franchising practices, with a focus on franchise agreements, transparency, and the fairness of contract terms. The franchise industry is closely monitoring these developments, as the proposed changes could impact both franchisors and franchisees. Opinions are divided, with some praising the move as necessary for modernizing regulations, while others express concerns about potential restrictions on franchisor flexibility. Franchise.Law recommends consulting legal experts to navigate the evolving landscape and ensure compliance with any new regulations.
