The Federal Trade Commission (FTC) has implemented numerous measures to mitigate concerns regarding franchisors' deceptive and unjust practices. The FTC issued a policy statement on July 12, 2024, cautioning that contract provisions, such as non-disparagement clauses that prevent franchisees from communicating with the government, are considered illegal. The statement underscores the unlawful nature of threats of retaliation against franchisees for reporting potential law violations and the significance of franchisee reports and voluntary interviews for FTC investigations. The FTC staff released guidance stating that franchisors cannot impose and collect undisclosed fees from franchisees, labeling such fees as illegal "junk fees."
The FTC's actions are part of a broader effort to ensure that the franchise business model remains an opportunity for small business owners. The agency also released an Issue Spotlight summarizing concerns raised by franchisees in response to a 2023 Request for Information, which received over 2,000 comments. The Spotlight included an analysis of Small Business Administration loan default data, highlighting that certain franchisors may present riskier investments. All related resources are available on the newly launched FTC franchise website. The Commission voted 3-2 to adopt the policy statement, with dissenting votes from Commissioners Melissa Holyoak and Andrew N. Ferguson.
