What action are you anticipating at the federal level with the change in administration and congressional control?
The FTC’s Franchise Rule, which mandates that franchisors provide prospective franchisees with a disclosure document containing 23 specific items of information, is currently under review. The rule, last amended in 2007, is being evaluated to determine its effectiveness and relevance in today’s franchising landscape.
"With the new administration’s pro-business stance, there is speculation about possible legislative initiatives that could impact franchising. While specific proposals have yet to be outlined, areas of interest may include tax reforms favorable to small businesses and efforts to reduce regulatory burdens.
However, it’s essential to monitor these developments closely, as changes in trade policies or immigration laws could also have indirect effects on the franchising sector. It’s also important to note that while federal regulations provide a framework, many aspects of franchising are governed at the state level."
—Jonathan Barber, Franchise.Law
Allan Dick, Sotos
"In Canada, FDDs are grant specific. Franchisors miss the fact that if they have an outstanding offer, and the financial statements they provided became stale before the offer was accepted with a signed franchise agreement, the offer must be put on hold until new statements are in hand and provided."
—Allan Dick, Sotos
"I would assume we won’t see any attempts by the National Labor Relations Board to move the test for joint employment from the traditional test. In terms of the federal franchise law, I would imagine that the push to amend the law and/or to pass a federal relationship law will be less."
—Joe Fittante, Larkin Hoffman
"I expect that the National Labor Relations Board and Department of Labor will again change the test for joint employer."
—Mark Burzych, Fahey Schultz Burzych Rhodes
"I believe there’s likely to be very little federal action in franchising for the next four years. Antitrust matters will also be eliminated, most likely."
—Nancy Lanard, Luther Lanard
"My hunch is that the administration change will end up curbing the work done by the FTC to regulate franchising."
—John Holland, Dady & Gardner
What efforts do you make to maintain compliance for franchisors in creating their FDDs and what’s something franchisors can sometimes miss?
"There’s a checklist that I have prepared to assist franchisors with compliance. Before each renewal period, I have them complete it, and then we review it together. One update that sometimes gets missed is updating the products and services that are required in the franchise system that must be reported under Item 8."
—Christina Fugate, Ice Miller
Kristian “Kit” Higgs, Kit Franchise Law
"Franchise regulations are always evolving, but regardless of political shifts, transparency and clear disclosures remain a priority. I expect ongoing discussions around franchisee protections, financial performance representations, and dispute resolution, which means franchisors will continue refining how they present information in their FDDs.
For franchise consultants, this reinforces the importance of working with professionals who can break down legal language into real-world implications, so their candidates have a clear understanding of what they’re signing."
—Kristian “Kit” Higgs, Kit Franchise Law
"Franchisors should not simply rely on their lawyers in drafting of the FDD, particularly with the annual updates. Franchisors should take a vested interest in it and make it routine to have the FDD reviewed by multiple internal people to make sure that it is accurate and complete, and not simply assume so because it’s been in place for years."
—Harris Chernow, Reger Rizzo Darnall
"We provide each active franchisor with a questionnaire to complete for updating their FDD. Franchisors can sometimes miss updating their initial investment cost estimates to account for inflation, identifying when they discount initial franchise fees during the prior year, and updating the descriptions of their training programs and technology requirements."
—David Cahn, Offit Kurman
We work with all of our clients to help them generate compliant, accurate franchise disclosure documents. Franchisors need to make sure they are checking Item 7 against the experience of their franchisees."
—Ritchie Taylor, Manning Fulton
