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How a bill introduced in Congress would improve franchisee rights

On Behalf of | Feb 3, 2022 | Franchise Agreements

The Federal Trade Commission’s (FTC) Franchise Rule details information that franchisors are required to disclose to prospective franchisees. The Franchise Disclosure Document (FDD) is required to include information like a financial statement, history of litigation and bankruptcy, earnings claims, fees and more. 

Too often, the FDD on which a franchisee makes their decision to invest contains misrepresentations and just plain false information. However, franchisees haven’t been able to take legal action against the franchisor when that happens.

The Franchisee Freedom Act

Rep. Jan Schakowsky, who represents a district in Northern Illinois in Congress, has introduced a piece of legislation called the Franchisee Freedom Act. The purpose of the legislation is to “provide a private right of action for persons harmed by violations of the Franchise Rule….” The legislation would allow people to take action in civil court to recover actual damages, “additional equitable relief, including rescission of any contract” and other fees and costs.

In a statement coinciding with the introduction of the bill, Rep. Schakowsky called the Franchise Rule a “weak rule” with “weaker enforcement” by the FTC. She noted that “franchisees need this legislation, which provides small business owners harmed by violations of the Franchise Rule with the means to recover for the harm done.”

The bill, not surprisingly, has the support of organizations that represent franchisees across the country. Representatives of some of these organizations talked about the legislation leveling the playing field for franchisees and franchisors.

This is just the first step in the process that would make this a law. However, it’s an important piece of legislation for current and potential franchisees to be aware of. Understanding your legal rights as a franchisee is crucial to protecting them. 

NOTICE: This blog is intended solely for informational purposes and should not be construed as providing legal advice. Please feel free to contact us with any questions you may have regarding this blog post.