As June 8 Deadline Nears, IFA Offers Toolkit, Other Help with Comments
The International Franchise Association (IFA) is rallying its members to share stories in the Federal Trade Commission’s Request for Information (RFI) and comment on rules changes that could negatively affect franchising. The deadline for comments is June 8. IFA offers a toolkit to guide and inspire messages from franchisors, franchisees and other supporters of the franchise business model.
Last week at IFA’s Legal Symposium, IFA President and CEO Matthew Haller gave the audience a full rundown on everything coming from the FTC. He told the audience, “IFA is not the International Franchisor Association; we exist to protect, enhance and promote franchising. Franchising only works when the needs of both parties are being met; it’s not some zero-sum game,” he said. With the Franchise Rule under its 10-year review, Haller calls FTC’s RFI “the most sweeping investigation of franchise business practices that has ever occurred.”
FTC’s Request for Information
On March 10, 2023, the Federal Trade Commission issued the RFI seeking public comment on franchise agreements and franchisor business practices. As part of the RFI, the FTC is asking franchisors, franchisees, current and past employees of franchisors and franchisees, government entities, economists, attorneys, academics, consumers, and other interested parties to weigh in on a wide array of issues that affect franchisees and their workers. The FTC has provided a link to submit comments and to provide an overview of the rules changes, which relate to how franchisors are permitted to control franchisees and their workers. At this link, the FTC also gives access to the web-based form that is used for sending in comments.
The FTC is the main agency regulating franchise sales disclosures. The FTC investigates unfair and deceptive trade practices, makes rules to prevent such practices, and enforces national laws protecting consumers and business competition.
Why the IFA Is Worried
The IFA is concerned that the FTC already has decided to enact regulations that would restrict franchisors’ ability to enforce brand standards, would diminish franchisees’ equity in their businesses, and would make franchisees and franchisors joint employers. If the joint-employer standard goes into effect, franchisors and franchisees would be considered co-employers of workers at franchise businesses if they both take part in determining workplace policies regarding, for example, wages, benefits, hiring, schedules, discipline and firing. This designation could also make them jointly liable for workplace infractions.
The IFA wants to ensure that FTC regulators fully understand how franchising works and the ramifications of its proposed rules changes. To that end, the IFA asks that its members share how the franchise business model works for them and how they collaborate with their brand partners; it wants comments to touch on successful ways a brand and its franchisees resolve challenges through relationships with franchisee associations as well as how franchisees and franchisors enjoy a mutually beneficial relationship. Commenters do not need to respond to every question on the FTC’s comment submission form, according to the IFA.
Three Points in IFA Toolkit
The IFA’s toolkit suggests three major points to keep in mind – but not to copy from – as its members submit comments in opposition to the rules changes:
- Franchising is not an industry. It is a business model used within hundreds of industries as a way to expand brands. Franchise systems at varying stages of maturity face different types of challenges so their leaders must manage accordingly, using approaches tailored to fit specific situations and needs. A one-size-fits-all rule won’t work across all franchise systems in all industries, and it conflicts with decades of objective data proving that the franchise model helps entrepreneurship thrive.
- Franchise practices such as consistent franchise agreement terms and enforcement of brand standards were established to protect franchisees’ equity in their businesses. If franchise business owners are allowed to deviate from a franchisor’s prescribed practices and branding rules, the value of that brand and the value of other franchisees within the system would erode.
- Franchisor-franchisee relationships originate from the knowledge of and education about essential franchise practices. Instead of focusing on a one-size-fits-all rule for all franchise systems and entities, the FTC should focus on improving the existing Franchise Rule, which has outgrown its initial function. The franchise disclosure document – a non-searchable PDF that is hundreds of pages long– is unwieldy and difficult to digest and warrants revision or replacement.
IFA Will Help Commenters
If asked, the IFA will review draft comments or aid in other ways as requested. Members who want the IFA to review their comments should submit them to advocacy@franchise.org by May 31. If you have already submitted a comment or plan to submit one without IFA assistance, the IFA requests an email containing those comments so the association can share it with members of Congress who exercise oversight of the FTC.
An IFA spokeswoman said, “The bottom line is that the FTC needs to hear as many real-life stories as possible from a variety of different business owners to help ensure they [FTC decision-makers] understand the vast diversity spanning across franchising and why a one-size-fits-all regulation would harm the entire business model.” She added that IFA will conduct a town hall series throughout the coming months to help franchisees understand the government policy issues currently faced by franchising; next week’s town hall will drill down into FTC actions.