International Franchise Association Pushes Back on Franchise Regulation The IFA has formally called on the Federal Trade Commission to shift its focus away from increased regulation of the franchise business model, arguing that the commission's recent actions exceed its authority.
By Carl Stoffers Edited by Jessica Thomas
Key Takeaways
- The IFA is urging the FTC to reconsider its approach to franchise regulation.
- Rather than additional regulation, the IFA supports updating the Franchise Rule to improve presale disclosures.
- The IFA has already taken steps to support franchise transparency, including California's S.B. 919 for franchise broker disclosure.
The International Franchise Association (IFA) has formally called on the Federal Trade Commission (FTC) to shift its focus away from increased regulation of the franchise business model, arguing that the commission's recent actions exceed its authority. In response to the FTC's re-opened request for information (RFI) on franchisor practices, the IFA highlighted concerns that the FTC's recent policy statement and staff guidance undermine the franchise model's viability and exceed the agency's authority.
An FTC RFI is a formal call for public input on specific topics or issues under the agency's jurisdiction. This process is part of the FTC's investigative or regulatory activities and gathers feedback, data and perspectives from stakeholders, including businesses, industry experts and the general public.
"In spite of all available legal, empirical, and anecdotal evidence to the contrary, the FTC seems to be operating under the false premise that franchisor control is inherently bad for franchisees," IFA president and CEO Matt Haller told Entrepreneur in a statement. "Imposing unilateral, substantial and burdensome regulations on the franchise community will result in significant harm on existing and future franchisees and reduce the viability of the franchise model."
Haller expressed concern over what he described as the FTC's misconception of franchisor standards and cited federal court rulings and studies demonstrating that franchisees benefit from consistent franchisor standards, enhancing operational uniformity and consumer experience.
The IFA and thousands within the franchise community have expressed that overly broad regulation would put franchised businesses at a disadvantage compared to non-franchised businesses, reducing competition and limiting franchisee equity. Instead, the IFA recommends the FTC prioritize modernization of the Franchise Rule, particularly around presale disclosures, a shift supported by bipartisan members of Congress, state regulators, and the Government Accountability Office.
To support these goals, the IFA has already spearheaded transparency updates, including the May 2024 release of its Responsible Franchising principles to serve as a roadmap for improving transparency and disclosure across the franchise community.
The IFA was among the standout performers in APCO's 10th annual TradeMarks study, which surveyed congressional staffers, officials from the Biden administration and business leaders during June, July and August. The study measured the effectiveness of trade associations across 15 critical criteria, including lobbying efforts, reputation management and coalition-building capabilities.
The IFA was named the top association in three of the 15 major categories: membership mobilization, bipartisanship and coalition-building, edging out competitors like the National Retail Federation and the American Bankers Association.
Related: See The Entrepreneur 2024 Top Franchise Supplier List
