On November 2, 2023, Tom France published “Managing Legal and Regulatory Challenges to Franchise Relationships: Franchisor Counsel Must Play a Key Role” in Hotel Online. The following is an excerpt:
The franchise business model currently faces intense scrutiny and challenges from a variety of sources that could significantly impact the operations of franchise systems and the value of franchised brands. Congress, for instance, is considering legislation to establish a “joint employer” standard that would expand the liability of franchisors for certain actions taken by their franchisees and that would make it easier to unionize franchisee employees. The U.S. Federal Trade Commission (FTC) is gathering information about franchise agreements and franchisor business practices in connection with a regulatory process that could result in federal regulation of franchise relationships. State legislators are pursuing changes in laws that would impose additional restrictions or requirements on various aspects of the franchise relationship, including non-compete agreements, required capital investments, rebates and commissions, mandatory sourcing of goods, labor and wage practices, and dispute resolution mechanisms. And franchisees are becoming more aggressive in seeking changes to franchise agreements and the franchise relationship that would strengthen their rights and increase their leverage over franchisors. These actions could materially impact the legal and regulatory oversight of the franchise relationship and significantly disrupt the franchise business model.
Click here to access the article.