Current Non-Compete Clauses Hurt Franchisees While Only Benefiting the Bottom Line of Franchisors
Palm Desert, CA (February 17, 2023) – The American Association of Franchisees and Dealers, a national trade association advocating for franchisees and independent dealers, led by chief executive officer and chairman, Robert Purvin, and Keith Miller, Director of Public Affairs and Engagement, addressed the Federal Trade Commission via a virtual forum in representation of franchisees to support the ban of non-compete clauses which hurt owners of franchised small businesses by forcing franchisees to accept unfair renewal agreements with their franchisor or no longer be able to earn a living in the occupation for which they have experience and training.
Noncompete agreements are used by franchisors to force unfair business practices on existing franchisees upon renewal, as new agreements often have new onerous terms included and if a franchisee refuses to sign, they risk losing their business, or their ability to earn a living. In seeking comments regarding its proposed new Rule, the FTC specifically requested commentary regarding whether the new rule should be applied in franchising.
“Except in exceptional circumstances, non-competition clauses are generally disfavored in many states as an undue restraint on an individual’s ‘right to work’ in his or her chosen profession,” said Purvin. “While an employee would be protected from enforcement of a non-competition agreement, the franchisee counterpart will often be barred from competition as a purported independent contract.”
Franchises support the national GDP through billions of dollars in products and services, payroll, and the creation of American jobs. Franchisees need to be protected as they are the ones investing, hiring, and supporting the local communities.
“They (franchisees) definitely did not understand the long-term implications of how the noncompete would be used to solidify the power imbalance in their relationship (with the franchisor,)” said Miller at the FTC testimony session.
In recent years, the Federal Trade Commission has started reviewing policies to protect franchisees from this power imbalance. Currently, Federal Trade Commission is reviewing the Franchise Rule. In addition, the Government Accountability Office will soon be releasing a report looking at franchise issues.
Media interested in interviews with Mr. Purvin and/or Mr. Miller, please contact Lucila Garcia.