The Federal Trade Commission announced on March 10, 2023, that it is seeking public comment to inform prospective rulemaking on certain franchisor business practices. In soliciting public feedback, the FTC said it is "interested in learning more about the means by which franchisors exert control over franchisees and their workers." This includes "how franchisors disclose certain aspects and contractual provisions of the franchise relationship" and "the scope, application, and effect of certain contractual provisions and aspects of the franchise relationship."

Topic Categories

The topics solicited for comment are wide-ranging and include the following areas of interest:

Franchisor-Franchisee Relationships

Topics include the ability of franchisees to negotiate the terms of franchise agreements, as well as the ability of franchisors to unilaterally enact changes to their policies and procedures, including operations manuals.

Franchise Agreements

Topics relate to the prevalence and effects of certain terms included in franchise agreements. Among others, these terms include restrictions on "no-poach" provisions, provisions requiring the purchase of goods or services from a franchisor or its designated suppliers, limits on franchisee discretion in pricing, and restrictions (or grants) of exclusive territories.

Nondisparagement and Goodwill Clauses

The FTC seeks specific commentary on the enforcement of nondisparagement and goodwill clauses in franchise agreements, including any provisions that bar or inhibit franchisees from filing complaints with government agencies that relate to unfair or deceptive franchisor trade practices.

Third-Party Payments

Topics relate to "kickbacks" and other payments franchisors may receive from third parties when franchisees purchase goods or services through those third parties. The FTC seeks commentary on requirements by franchisors that franchisees purchase from approved suppliers, forms of consideration or payment from those suppliers to franchisors, and the disclosure of such practices to franchisees.

Other Categories and Comment Submission

In addition to those categories, the FTC has asked for comments on several other discrete topics, including wages and working conditions, language barriers for potential franchisees and franchisors' control over nonlabor operating costs for franchisees.

The public comment period is open through May 9, 2023, and comments may be submitted through

For More Information

If you have any questions about this Alert, please contact Courtney L. Baird, James H. Steigerwald, Nicholas M. Centrella, Jr., any of the attorneys in our Trial Practice Group, any of the attorneys in our Franchise and Distribution Law Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.