IFA Urges FTC to Protect Franchise Businesses in Noncompete Rule

Government Relations

Opposes Commission’s proposed noncompete clause rule; highlights business necessity for noncompete agreements in franchising

WASHINGTON – The International Franchise Association (IFA) today urged the Federal Trade Commission (FTC) to reject a “blanket ban on noncompete clauses in franchise agreements,” highlighting that an across-the-board ban would harm franchisors and franchisees, damaging the franchise business model. The comments are in response to the Commission’s recent Notice of Proposed Rulemaking for its proposed “Noncompete Clause Rule.”

In comments submitted to the FTC this week, IFA General Counsel Sarah Bush writes:

“Noncompete clauses protect the integrity of franchising and individual franchisees from unfair competition from existing and former franchisees. Such a ban would be extremely damaging to the franchise business model, encourage breaches of contract, and hurt small business owners that depend on the viability of the franchise system to protect their equity in their franchised businesses.

“Noncompete clauses serve an important and legitimate function for businesses, including franchising. They serve to protect the equity of franchisees in the businesses that they have established, the confidential and proprietary information of franchisors, and the goodwill, knowhow, and integrity of franchise systems, and in ensuring such protections, they promote competition. There is neither a factual nor a legal basis that would support voiding all noncompete clauses under all franchise agreements across hundreds of industries under all circumstances.”

Read IFA’s full comments here.

Earlier this week, IFA joined more than 280 organizations in opposition to the proposed rule and the FTC’s authority on the issue, saying, “We strongly oppose the proposal because noncompetes serve vital business and employee interests and because the FTC lacks legal authority to issue the proposed rule.”

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About the International Franchise Association:

Celebrating over 60 years of excellence, education, and advocacy, the International Franchise Association (IFA) is the world’s oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations, and educational programs to protect, enhance and promote franchising and the approximately 790,492 franchise establishments that support nearly 8.4 million direct jobs, $825.4 billion of economic output for the U.S. economy, and almost 3 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees, and companies that support the industry in marketing, law, technology, and business development.

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