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Franchisees seek FTC investigation into unfair practices

On Behalf of | Feb 10, 2022 | Firm News |

A group of U.S. franchisees from various industries wants the Federal Trade Commission (FTC) to review franchisors for unfair and questionable practices, placing a spotlight on the need for future rule changes.

Eleven franchisee associations support a petition filed in September by Subway franchisee Keith Miller and the National Coalition of Associations of 7-Eleven Franchisees. The groups want the FTC to pursue an investigative study of the entire business model behind franchising.

Kickbacks and loyalty programs

The group’s petition has a specific focus on nine companies, including 7-Eleven, Subway, the UPS Store, IHG Hotels and Resorts, Choice Hotels, Experimax/Experimac, Supercuts, Massage Envy and Dickey’s Barbecue Pit.

Among the issues that the franchisees want addressed in this specific case include:

  • Mandates that require the remodeling of stores. Funding is not provided by franchisors, instead leaving the financial burden on the franchisee.
  • Kickbacks from vendors.
  • The amounts franchisees must pay franchisors and whether the implementation of certain controls is necessary.
  • Questionable loyalty programs that prove more advantageous to franchisors than franchisees

Such disputes are not uncommon between franchisees and franchisors, who sometimes have uncomfortable relationships.

Systemic effects of policy

A survey conducted last summer among 7-Eleven franchisees sheds light on some of the troubles and dissatisfaction franchisees experience due to franchisor policies.

Nearly 90% of the nearly 600 respondents noted that operating their stores had a negative effect on their health. Meanwhile, 75% declared that they would not become a 7-Eleven franchisee if they had the chance to do it again.

Self-advocation remains critical

This case represents another example of how franchisees may often have to advocate for themselves for fair and favorable business practices.

In this instance, franchisee associations helped individual franchisees advocate for changes in industry-wide practices.