Subscription-Centric Businesses Would Have Been Harmed, Group Said
Updated July 10, 2025
The International Franchise Association is pleased with the Eighth Circuit Court of Appeals ruling that overturns the Federal Trade Commission’s (FTC) Negative Option Rule, more commonly known as the Click to Cancel Rule. Viewing the regulatory change as a potential threat to small businesses, the IFA had marshaled opposition to the rule since its inception. The trade organization in particular saw the rule as endangering health-, fitness- and wellness-focused franchises because many of them depend on recurring revenue from subscriptions. The Click to Cancel Rule, which had been scheduled to take effect July 14, had aimed to simplify the way consumers cancel memberships and subscriptions.
In a news release from IFA, its general counsel, Sarah Davies, hailed Tuesday’s court ruling as “a win for small businesses, which will not be forced to comply with an overly broad regulation imposed by the FTC without the foresight of its ramifications. The FTC hastily imposed this regulation that will hurt many franchises’ business models, make it more burdensome for their customers, and raise costs for all. This unnecessary rule not only disrupted a process that worked for the benefit of both consumers and small business owners but also added another layer of regulatory complexity that small businesses can’t afford to navigate.”
The Most-Affected Franchises
In franchising, recurring membership-based contracts are a staple of many fitness centers, massage and personal wellness studios; preventive health care providers offering stretching, cryotherapy and other treatments; and children’s activities such as sports training and adventure parks. Consumers’ membership or subscription agreements spell out cancellation conditions. The IFA had criticized the FTC’s Negative Option Rule as applying too broadly by instituting that all contracts be set up as click-to-cancel while ignoring the sweeping impacts and high costs of compliance to franchised small businesses. The IFA also contended that consumers received no significant benefits under the FTC rule.
The FTC’s proposed rule changes, adopted last October, mandated that businesses have customers’ informed consent before billing for memberships, automatic renewals and free trial offers, according to an Associated Press article. The FTC also had stated that businesses must be fully transparent about when free trials and promotional deals will stop, and that businesses must allow consumers to halt recurring subscriptions as easily as they started them. The AP noted that the now- overturned rule change was part of the “Time is Money” initiative announced in 2024 by the Biden administration; it would have had a major impact on online streaming video services as well as on franchises.
Lengthy Opposition by IFA
This past February, the IFA Law Center – joined by the National Association of Spa Franchises and the Health & Fitness Association – advocated that the rule be vacated. Their court brief stated that the organizations’ members would encounter “severe economic and administrative burdens” in order to comply with the Negative Option Rule. The brief also stated that these concerns had been “disregarded by the FTC, primarily because they refused to conduct the required preliminary regulatory analysis.”
The FTC had asserted that it wasn’t required to do a preliminary regulatory analysis because it initially determined that the rule’s impact on the national economy would be less than $100 million, the AP article said. An administrative law judge determined that the economic impact would exceed the $100 million limit, thus requiring the analysis. In overturning the rule, the court wrote: “While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the Commission’s rulemaking process are fatal here.”
The IFA’s opposition had been stewing since June of 2023, when the organization sent comments to the FTC that firmly opposed the change, which technically amended the FTC’s Negative Option Rule. Then in January 2024, Davies testified at an informal FTC hearing. An IFA article about Davies’ testimony is available here.
About the IFA
Founded in 1961, the IFA represents franchising globally. The organization works by means of influencing all levels of government and their policies, media relations, and educational programs in order to benefit franchising. The IFA’s 2025 Economic Outlook report projects that the growth of franchising will exceed that of the United States’ gross domestic product this year. According to IFA statistics, there are about 830,000 franchise businesses in the U.S., and those businesses support more than 8.5 million direct jobs while generating $896.9 billion in total sales of goods and services.
