While franchisees can file complaints with the Federal Trade Commission (FTC), the FTC only has limited authority to hold franchisors accountable for disclosure violations. As a result, franchisees who have complaints against their franchisors should hire an experienced franchisee attorney to help them assert their legal rights. Depending on the circumstances, this will most likely involve pursuing mediation or arbitration—though franchisees can also take their claims to court in some cases.
The Federal Trade Commission (FTC) regulates the franchise industry at the federal level. The FTC administers the regulations that establish franchisors’ disclosure obligations, and it has the authority to pursue enforcement actions for fraud and unfair business practices under the Federal Trade Commission Act (FTC Act) when warranted.
In practice, however, the FTC rarely takes action against franchisors.
As a result, while franchisees can file complaints with the FTC, doing so often has little (if any) utility. Broadly speaking, the odds that the FTC will take action are low; and, even if it does, it is unlikely to result in an adequate remedy. In that case, the better course of action is typically to speak with a franchisee attorney about pursuing other options.
What Are My Options for Filing a Complaint Against My Franchisor?
If filing a complaint with the FTC isn’t likely to improve your situation, what can (and should) you do? When facing a dispute with your franchisor, your primary options include:
- Attempting to Negotiate – One option is to attempt to negotiate an amicable resolution. If your franchisor has clearly violated its disclosure obligations or violated your rights as a franchisee, it may be willing to consider a reasonable settlement. Depending on the circumstances, this could involve negotiating your exit from the franchise system, or negotiating a settlement that keeps your franchise agreement intact.
- Pursuing Mediation or Arbitration – If settling with your franchisor is not viable (or is not in your best interests), then you may need to pursue a claim under your franchise agreement’s mandatory alternative dispute resolution (ADR) clause. Nearly all franchise agreements include these clauses, which require franchisees to pursue mediation or arbitration (or both) instead of taking their claims to court.
- Filing a Lawsuit in Court – In limited circumstances, franchisees may have the option to file a lawsuit in court instead of pursuing mandatory ADR. If you have a claim against your franchisor that is not subject to mandatory mediation or arbitration, an experienced franchisee attorney can help you decide whether it makes sense to go to court under the circumstances.
Making an informed decision about how to proceed requires a critical assessment of all relevant facts and circumstances. These include not only your likelihood of success in ADR or litigation, but also the costs involved. While mandatory ADR clauses are ostensibly neutral, in practice, franchisors often use these clauses to increase the costs of pursuing dispute resolution for their franchisees. For example, franchisors often require franchisees to pursue ADR in the city where their headquarters are located; and, while parties must participate in mediation in good faith, neither party is obligated to settle.
Is It Worth Filing a Complaint with the FTC?
Given these considerations, you may be wondering whether it is worth filing a complaint with the FTC and seeing what (if anything) happens. Generally speaking, there is no harm in filing a complaint.
However, the FTC won’t necessarily keep you updated, and even if it does, it could take years for your complaint to be resolved. Even then, the outcome will be beyond your control, and there is no guarantee the FTC will pursue the specific outcome you’re hoping for. With that in mind, we strongly recommend pursuing the other options you have available.
FAQs: Filing a Complaint Against Your Franchisor
How often does the FTC pursue complaints against franchisors?
The FTC rarely pursues complaints against franchisors. As a result, as a franchisee, you should not rely on the FTC to take legal action on your behalf. Instead, if you need to hold your franchisor accountable, consult an experienced franchisee attorney promptly.
Can franchisees sue their franchisors under the FTC’s Franchise Rule?
No. While the FTC’s Franchise Rule establishes franchisors’ disclosure obligations, it does not establish a private right of action for franchisees. As a result, franchisees cannot sue their franchisors under the FTC’s Franchise Rule. Instead, franchisees must assess other potential grounds for taking legal action—such as alleging a breach of their franchise agreement or a violation of their state’s franchise law.
What should I do if I need to file a complaint against my franchisor?
If you need to file a complaint against your franchisor, we recommend speaking with an experienced franchisee attorney about your legal options. It’s important to act promptly in this scenario, and you will need to avoid mistakes that could compromise your ability to hold your franchisor accountable. An experienced franchisee attorney can explain everything you need to know.
How Goldstein Law Firm Can Help
At Goldstein Law Firm, we protect franchisees’ rights. If you have a complaint against your franchisor, we can help you make informed, strategic decisions based on the circumstances. We can file a claim on your behalf promptly if warranted; and, regardless of the circumstances, we can help you pursue a favorable resolution as cost-effectively as possible.
Request a Free Initial Consultation with National Franchisee Attorney Jeffrey M. Goldstein
Do you need to know more about filing a complaint against your franchisor? If so, we can help, and we strongly encourage you to reach out. To request a free initial consultation with national franchisee attorney Jeffrey M. Goldstein, call us at 202-293-3947 or tell us how we can help online today.
