Federal Government Supports Franchisees in Conflict with Franchisers
In the ongoing dispute between franchisers and franchisees, the federal government has intervened in favor of the smaller business owners. Franchisers such as McDonald’s and Jiffy Lube grant individual entrepreneurs the license to operate their brand, with franchisees investing capital to run one or multiple locations.
FTC Policy Statement on Franchise Practices
Recently, the Federal Trade Commission (FTC) released a policy statement and guidance for franchisers, warning them against restricting franchisees from communicating with government officials and adding undisclosed fees. The FTC aims to address concerns about unfair practices in the franchising industry and ensure that the franchise model continues to offer opportunities for honest small business owners.
Industry Scrutiny and GAO Report
The FTC’s actions follow an industry-wide examination initiated by the agency’s request for information last year. Concurrently, the Government Accountability Office (GAO) published a report revealing that franchisees often lacked decision-making control and were unaware of all risks before purchasing a franchise license.
Stakeholder Feedback
Over 2,200 responses were received by the FTC, highlighting a common request from franchisees for regulatory changes to improve the industry’s governance. Conversely, many franchisers opposed significant modifications to the existing rules governing franchising.
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