What They are Saying: Business Community Responds to the FTC’s Request for Information

What They are Saying: Business Community Responds to the FTC’s Request for Information

WASHINGTON – The International Franchise Association (IFA) last week submitted comments to the Federal Trade Commission’s (FTC) Request for Information on the franchisor-franchisee relationship. Hundreds of franchisors, franchisees, suppliers, and the business community at large echoed the need to protect franchising and avoid a one-size-fits-all regulation that will harm the entire business model.

See what others are saying about the impacts overly broad regulation could have on the 800,000 franchised businesses in the United States.

Franchise Brands

Applebee’s: “Franchising works best when there are strong franchisor-franchisee relationships focused on the mutually beneficial objective of strengthening the franchise system and brand value. To that end, Applebee’s and its franchisees engage in constant, transparent communication to better serve guests. Moreover, the franchise business model inherently promotes entrepreneurialism and competition, often enabling franchisees to enter a competitive line of business they otherwise might not be able to due to lack of expertise or resources.” – June 1, 2023

CertaPro Painters: “CertaPro has helped thousands of franchisees and countless employees and associates achieve success that would not have been realistic without the franchise model. Franchisees have built equity based upon their investments of both time and money, which has allowed them to invest in their people and in the communities they serve. Franchisees benefit from established systems, operational guidelines, and ongoing support, which helps to mitigate the risks associated with starting their own business. CertaPro Painters franchisees truly are in business for themselves, but not by themselves.” – Michael Stone, President and CEO, June 8, 2023

Great Clips: “Our focus every day is to build and maintain a thriving and robust franchise system; one that treats everyone fairly and provides ample opportunity for all. As such, I urge the FTC to not take any action that would harm franchisees, franchisors, and all those who benefit from being involved in franchising. Franchising is a wonderful business model. Franchising is an important vehicle to help individuals from all walks of life improve their economic position.” – Steve Hockett, CEO, June 2, 2023

Hilton Worldwide: “The broad growth of the franchise business model across so many different industries demonstrates the incredible strength of the model for all parties involved. It also demonstrates that significant perils exist in any attempt to regulate franchising as if it were a single industry. None of the industries that utilize franchising are the same, and a regulation that makes sense in one type of business may cause unintended consequences and damage in others.” – Danny Hughes, June 7, 2023

IHOP: “A franchise business model like that of IHOP’s is a highly competitive system, both internally and externally, that facilitates the development of businessowners who may not otherwise have the connections or resources to embark on or grow their business ventures in the absence of a strong franchise system. Even more established and sophisticated industry players choose franchising time and time again, because franchise systems like IHOP can actively invest in its franchisees and foster growth in diverse markets.” – June 1, 2023

Marriott International: “Franchising offers irrefutable benefits to franchisee investors, consumers, and workers alike. Franchising serves as an important growth vehicle for businesses in numerous industries and it is a critical component of the U.S. economy. Given the success of the franchise business model, we believe that further regulation by the FTC is not warranted. The FTC’s regulation of the terms of agreements between franchisors and franchisees may in fact impede the effective and efficient administration of franchise systems, to the ultimate harm of the very franchisee investors that the FTC seeks to protect.” – June 8, 2023

Sport Clips: “Franchising has created more individual and familial wealth than any other business model in multiple industries. If you were to focus the FTC’s attention on the unrepresentative negative comments of a relatively small number of current or former franchisees in your assessment of the RFI, then you would also be choosing to disregard all of the many advantages of the franchise business model.” – Gordon Logan, Founder and Chairman – May 31, 2023

Tropical Smoothie Café: “We collaborate and support each other.  We believe we are a system of great relationships that differentiate us from the non-franchised restaurants out there. Our franchisees provide a consistent experience for guests that want to enjoy Tropical Smoothie Café all over the country. And they get to do that as part of a system, but also as entrepreneurs – running their own businesses, responsible for their own teams and success, and able to invest in their future.” – Charles Watson, CEO, June 5, 2023

Franchisees

Auntie Anne’s/Cinnabon Franchisee Alex Johnson: “Without the franchise business model, our small business would have struggled to survive, but franchising enabled us to come through the crisis –and even emerge stronger. Not only that, the relationship enables the kind of ongoing innovation that I could never do on my own. It helps me remain competitive in a tough industry that’s only getting tougher by the day.” – May 30, 2023

Dunkin’ Franchisee Robert Branca: “What is critical for me to impart is that our Dunkin B[rand Advisory Council] and senior management worked hard to establish and document bylaws, processes, and structure on how potentially divisive issues are to be properly addressed. The more that we used them to examine and qualify problems, the better we got at using them and the better our results became…A properly functioning franchise system is a boom to the American economy, offering a path to business ownership and support along the way to any American from any walk of life. – June 3, 2023

Express Employment Franchisees: “Because of franchising, I am able to own my own business and provide a needed service in my community. In addition, franchising also offers me initial and ongoing training, marketing expertise, nationwide brand recognition, and much more…It’s because of franchising that I can provide for myself and my family and, more importantly, provide good jobs to good people. I ask that you please allow me and all franchisees of other brands to continue to serve our communities with the good products we offer by keeping the current rule in place.” – June 5, 2023

Multi-Brand, Multi-Unit Franchisee David Barr: “Our restaurants provide opportunities for advancement for our employees to reach their personal and professional goals. We invest in our communities, sponsoring local school events and youth leagues to build relationships with our consumers and employees beyond the products we sell in our restaurants…The risk to franchisees (as well as the consumers they serve and the communities they support) of a relationship rule that applies uniformly across all industries in which franchise brands operate is the elimination of those franchise brands because they are not afforded the same flexibility as their non-franchised counterparts.” – June 8, 2023

Planet Fitness Franchisee David Humphrey: “Franchisors and franchisees are inextricably bound together in the entire ecosystem of franchising, and it’s very hard to significantly punish one side without unintentionally hurting the other... imposing additional one-size-fits-all rules across dozens of industry verticals and thousands of franchise companies is unlikely to end well for the franchisees you’re trying to protect.” – May 7, 2023

Taco John’s Franchisee Tamra Kennedy: “Franchising is not one size fits all. The concept of franchising works across all business types because the foundational premise is that there is a contractual partnership in place to govern roles and outcomes…Most of us – nearly all of us – count on franchising to remain fundamentally sound. Big investment or small, this is my investment. I am just trying to make the best tacos in town to feed my neighbors. Franchising with my brand allows me to proudly do just that.” – May 22, 2023

Business Community

American Hotel and Lodging Association (AHLA): “Franchising, as a business model, is critical to the success of the hotel and lodging industry and provides entrepreneurial opportunities for prospective small business owners of all types. Franchise arrangements vary considerably across industries, and even across segments within the same industry… AHLA urges the FTC to recognize that a one-size-fits-all approach runs a high risk of unintended consequences when applied across different industries and that franchising is already appropriately regulated at both the state and federal levels. Additional regulation may interfere with the business relationships that make franchising a successful practice for entrepreneurs and brand expansion.” – Chirag Shah, June 7, 2023

Isabella Hindley, American Action Forum: “The success of the franchise business model lies in the unique and mutually beneficial relationship between franchisees and franchisors. Franchisees are more likely to remain in business after two years than independent businesses due to franchisor-provided support such as brand recognition, general business format, and various other assistances. The franchisor benefits from rapid growth and increased brand recognition due to the franchisee-supplied capital that is necessary for business expansion. Therefore, any future proposed policies regarding franchising should refrain from breaking down the relationship between franchisors and franchisees by drastically limiting franchisor involvement.” – March 29, 2023

U.S. Chamber of Commerce: “The solicitation suggests a desire to effectively destroy the franchise model in the United States, an objective clearly outside of the FTC’s statutory authority and unsound as a matter of policy…we urge the FTC to abandon this solicitation and devote its resources to appropriate enforcement efforts that actually fall within its jurisdiction.” – Sean Heather, June 5, 2023

National Restaurant Association: “The Law Center and the Association cannot envision broad FTC regulations of the business relations between the separate businesses of franchisors and franchisees. To do so would endanger the business value of many small family businesses, as well as endangering the safe and reliable delivery of food products throughout the nation. We request the FTC proceed no further with broad sweeping regulations of the franchise model, instead focusing on protecting potential buyers of franchises through education and due diligence requirements.” – Angelo Amador and Jordan Heiliczer, June 8, 2023

Home Care Association of America: “Within HCAOA and the home care industry generally, the franchise business model has been the vehicle that has allowed dozens of franchisors to enable thousands of franchisees to start and grow thriving businesses that provide thousands of Care Professional jobs and enable hundreds of thousands of families to have the peace of mind of keeping their loved ones in need of care at home rather than placing those family members in an out-of-home facility. Never in U.S. history has there been such a need for quality in home care service providers due to the doubling of the number of older adults over the last 30 years. Franchising has proven to be a successful ingredient in meeting this growing need.” – Eric Reinarman, June 8, 2023

The Franchise Community

Franchise Attorney David Kaufman: “The FTC’s purported interest in these topics reveals its goal: intrusive government regulation of the franchisor-franchisee relationship and the franchise agreements that govern these relationships, based on nothing more than anecdotal evidence received as “comments” to the FTC…the FTC may find it wiser to stay in its lane and promulgate a modern, state of the art and franchisee-friendly disclosure protocol.” – New York Law Journal, May 30, 2023

FranFund CEO Geoff Seiber: “As suppliers that support franchise systems in all industries, we see firsthand the nuanced differences in franchise relationship management and issues that arise in a franchise system from one industry to the next…Restrictive regulation that inhibits that flexibility is certain to have anti-competitive effects, essentially forcing franchised businesses out of their industries because they are unable to compete with non-franchised brands within their industry. And, that hurts all stakeholders of franchising—lost job opportunities for employees of franchisors, franchisees and suppliers; reduced competition amongst the remaining non-franchised business in the industries, less choices for and loss of trust by consumers with brand loyalty.” – June 8, 2023

International Franchise Consultant Michael Seid: “I question the FTC’s assertion that there is a ‘growing concern around unfair and deceptive practices in franchising,’ as the evidence does not support this assertion. Simply because a relatively small group of individuals represent that they speak for the vast majority of franchisees, or anonymously provide anecdotal examples in reply to the RFI, does not equate to a growing or significant problem in franchising nor, does it make it a fact.” – May 15, 2023

Since the announcement of the RFI, IFA has worked with the entire franchising community urging them to share their story to encourage the FTC to recognize the diversity of the business model spanning 300 industries as they consider any potential rulemaking. Hundreds of additional IFA members shared how franchising is working, detailing the opportunities franchising has given them to own and operate their own business, and why they are concerned about actions from the Commission that could destroy the equity in their business and their ability to remain independent.

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