FTC Franchise Rule Under Review: IFA Responds
On September 10, 2020, the Federal Trade Commission (FTC) announced it would hold a Public Workshop to discuss its decennial review of the FTC Franchise Rule, the primary rule regulating the franchise business model. While the Workshop was held on November 10, the agenda sought to address the following three topics as related to franchise disclosure document (FDD) requirements: 1) Financial Performance Representations: What Should be Disclosed? And Why?; 2) A Discussion of Disclaimers, Waivers, & Questionnaires; and 3) The Pros and Cons of the Current FDD Format.
In preparation for the FTC’s Workshop and request for public comment regarding the Franchise Rule, the IFA assembled a member-based “FTC Task Force” to prepare for and participate in discussions with the FTC and other advocates seeking to make broad sweeping changes to the industry. Continuing that effort, the IFA hosted five phone calls with FTC Commissioners and staff to discuss the franchise business model and the potential impact of any proposed changes.
Six individuals from IFA’s FTC Task Force participated as panelists at the November 10 Workshop, and Rep. Kevin Hern, a friend to franchising and a McDonald’s franchisee, gave the opening introduction. While the franchise community was well represented by those who participated at the workshop, Reps. Kevin Hern and Dean Phillips went the extra mile to lead a bipartisan Congressional letter, with 30+ signatories, in support of the Franchise Rule and encouraging the FTC to leave it in substantially its current format.
Leading up to the December 17 deadline to submit written comments to the FTC, the IFA circulated a similar brand sign-on letter, racking up 174 brands in support, and submitted to the FTC for review. Lastly, the IFA drafted more detailed comments to the FTC, addressing the three topics discussed at the FTC Workshop and detailing the potential consequences to the industry should any proposed changes be enacted.
On behalf of the franchise business model, these advocacy efforts have sent a strong and unified message to Congress and the FTC that significant changes to the Franchise Rule could undermine the success of the franchise model for franchisor and franchisee alike. While the FTC has not declared a future timeline in its continuing review of the Franchise Rule, the IFA will continue engaging at the highest levels to insure that the voice of franchising is heard and protected.