New Bill Would Make It Easier for Franchisees To Sue Parent Brands

Democratic members of Congress have reintroduced a bill that would make it easier for franchisees to sue franchisors over Federal Trade Commission (FTC) rule violations.

This month, U.S. Reps. Jan Schakowsky (D-Ill..), Jared Huffman (D-Calif.) and Hank Johnson (D-Ga.) re-introduced the Franchisee Freedom Act, a bill they say is designed to “level the playing field” between franchisors and franchisees when it comes to legal rights.

Originally introduced in December, the bill would give franchise owners a private right of action if a franchise parent company violates the FTC’s Franchise Rule, including making wrongful disclosures.

Currently, there’s no private right of action allowed on FTC Franchise Rule violations, meaning franchisees have limited legal rights to redress wrongs committed by franchisors, according to the bill’s co-sponsors.

“Becoming a franchisee can be a lifeline for those looking to create their own American dream. Unfortunately, due to a weak rule and even weaker enforcement of the Federal Trade Commission’s Franchise Rule, that dream can turn into a nightmare, one in which they are under the thumb of a predatory corporation,” Schakowsky said in a statement. “That is why it is imperative for franchisees that we pass this legislation, which provides small business owners harmed by violations of the Franchise Rule with the means to recover from the harm done.”

The bill has been endorsed by nearly 50 franchisee and small-business groups, and has received support from Franchisee Advocacy Consulting, an advocacy organization for franchise owners.

“Full and proper disclosure is foundational to the success of franchising,” Keith R. Miller, the founder of Franchisee Advocacy Consulting, said in a statement. “This legislation would hold franchisors responsible for violations of the FTC Franchise Rule by allowing harmed franchisees their fundamental right to court access to mitigate their claims.”

The bill would also protect a franchisee’s right to join an association without interference or retaliation from the parent company. In the fitness and wellness industry, some franchisee groups have taken up this option to protect their collective interests..

In June, YogaSix franchisees announced the official formation of the Independent Association of Yoga Franchisees (IAYF), which represents more than half of all YogaSix studios.

The IAYF is one of the organizations endorsing the Franchisee Freedom Act. Other franchisee organizations in the fitness and wellness industry supporting the bill include those from 100% Chiropractic and Massage Envy.