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Changes might be in store with franchising

On Behalf of | Aug 1, 2023 | Franchising |

For Florida residents who are thinking about starting a business of their own, franchising is a useful way to do so while avoiding the complexities of beginning from the ground up. The benefits of opening a franchise of an already known and successful business is that there is a proven strategy that can be mimicked with help from the corporation. Still, there are pitfalls that should be known. Changes might be in store as the Federal Trade Commission could establish new regulations.

Franchising practices are being questioned

The FTC might move forward with greater scrutiny of franchises. This is worrisome for the larger companies that rely on franchising as part of their primary business model. That includes brands like McDonald’s.

The objective is to improve fairness. Currently, it is gathering information from franchisees, employees, the companies themselves and stakeholders. A complaint that often arises is how the corporations maintain much of the power in the relationship and those working beneath them as franchisees and employees are in an unequal position.

An estimated 800,000 businesses are franchise-related and it is a major employer across the United States. The FTC is weighing whether it should ban noncompete clauses and is thinking about applying that change to the franchisor-franchisee relationship. Employee treatment is also being assessed since some states like California have made the franchisors the target of greater liability.

The International Franchise Association that represents the industry is against these changes. It claims that the single set of rules might not be applicable for every business, but that is what the FTC seems to be considering.

Current and prospective franchisees should be prepared for substantive changes

The FTC is still in the early stages of this process, but people who are considering purchasing a franchise or who already have one may need to consider how to prepare for this eventuality.

When getting involved with a franchise, there are aspects that need to be known. For every issue that comes up from the start to the day to day running the business and expanding, it is important to have assistance with franchise law.