Franchising is a big and growing business: Franchises are almost 11 percent of businesses with employees, employ an estimated 9.1 million people, and are consistently adding jobs faster than non-franchised businesses.
But the rewards and burdens of franchising’s success are not fairly shared. The small-business owners behind the corporate brands lack basic business protections. Franchisors have been accused of taking away franchisees’ businesses unfairly, blocking franchisees from selling or passing on their franchises at a fair price or retaliating when franchisees speak out and join together.
We Are Main Street will cover efforts to strengthen franchisee rights, share franchisee voices and provide research to fuel efforts for reform.
The International Franchise Association often claims that franchising is already heavily regulated. The regulation is not by the government, however, but by franchisors. Franchisees are typically bound by thousands of pages of manuals, rules, policies and procedures, which franchisors can change at will as often as they like. Franchisors don’t even have to show franchisees most of these documents before franchisees sign on the dotted line and commit their personal assets – often their home or retirement savings –to purchase a franchise. Violating any one of these franchisor-imposed regulations can mean losing one’s business.
The Federal Trade Commission’s Franchise Rule only requires franchisors to disclose certain information before franchisees invest. But the FTC has only acted once to enforce these requirements since its revised Franchise Rule took effect in 2008. And the Franchise Rule does not protect franchisees from franchisor conduct after franchisees invest.
With weak federal regulation and no state regulation in most states, franchisees have little protection from franchisors who, franchisees charge:
- Require hundreds of thousands, even millions of dollars of renovations or equipment purchases – and try to terminate franchisees who say the projects don’t make business sense.
- Try to take back profitable stores for themselves and/or to terminate “pain in the ass” franchisees.
- Refuse to renew longtime franchisees because they don’t go to enough meetings – or perhaps, because they support franchise reform legislation.
The large corporations that sell franchises have too much power over small-business franchisees. We Are Main Street is sponsored by the Service Employees International Union, which helped a franchisee rights bill pass both houses of the California Legislature in 2014, is supporting a new California franchisee rights bill this year, and is committed to helping win fairness across the country both for franchisees and employees.
Come back often – or get our updates in your email inbox.