{"id":152022,"date":"2015-05-18T17:57:15","date_gmt":"2015-05-18T17:57:15","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/?p=152022"},"modified":"2015-05-18T17:57:15","modified_gmt":"2015-05-18T17:57:15","slug":"seiu-petitions-federal-watchdog-launch-investigation-franchise-industry","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/newswire\/seiu-petitions-federal-watchdog-launch-investigation-franchise-industry\/","title":{"rendered":"SEIU Petitions Federal Watchdog to Launch Investigation into Franchise Industry"},"content":{"rendered":"

(Common Dreams<\/a>) –\u00a0WASHINGTON – Citing evidence of a dramatic power imbalance between the nation\u2019s top franchisors and their franchise operators, the Service Employees International Union petitioned<\/a> the Federal Trade Commission Monday to launch an investigation into the franchise sector and issue recommendations for curbing \u201dabusive and predatory\u201d practices by franchisors in the $800 billion industry.<\/p>\n

\n

\u201cFranchised businesses represent a large and growing segment of the nation\u2019s businesses,\u201d the petition reads. \u201cYet, unlike traditional small businesses, most franchises reflect a profound imbalance of contractual power that favors the franchisor and places franchisees in a financially precarious situation.\u201d<\/p>\n

The 32-page petition calls on the FTC to invoke its authority to issue civil investigative demands that would compel top franchise companies to turn over information about their relationships with franchisees.<\/p>\n

The request for investigation contains evidence from an extensive review of franchise agreements at 14 of the largest franchise systems in the country finding that franchise agreements are consistently one-sided, often allowing franchisors to terminate franchisees for minor violations of one of thousands of pages of ever-changing rules.<\/p>\n

The petition details five franchisor practices that are particularly harmful and appear endemic to the sector:<\/p>\n

    \n
  1. Incomplete or misleading financial performance representations made to prospective franchisees;<\/li>\n
  2. Unreasonable capital expenditure demands tied to renewal of franchise agreements;<\/li>\n
  3. Retaliation against operators who join franchisee associations;<\/li>\n
  4. Unfair termination or nonrenewal of franchise agreements;<\/li>\n
  5. Arbitrary denial of franchisees\u2019 requests to sell or transfer their business<\/li>\n<\/ol>\n

    Franchise operators from major chains including McDonald\u2019s and 7-Eleven voiced their support for a federal investigation Monday, describing how their experiences in the franchise sector underscore the urgent need for balance and fairness in the industry.<\/p>\n

    Jos\u00c3\u00a9 Quijano, a former Vice President at McDonald\u2019s Corp. and current McDonald\u2019s franchisee from Puerto Rico, spoke on behalf of all Puerto Rican McDonald\u2019s operators about how McDonald\u2019s franchisees on the island collectively lost control of their businesses overnight in 2007 after the company unilaterally installed the South American investment firm Arcos Dorados as the region\u2019s new franchisor, empowered to make its own rules in place of McDonald\u2019s while also actively competing as a franchise operator itself by adding new stores in the market.<\/p>\n

    \u201cWe enjoyed a good relationship with McDonald\u2019s until we developed the Puerto Rican market and it became very profitable,\u201d said Luis Moyett\u00a0, a McDonald\u2019s franchisee who opened his first store in Puerto Rico in 1981. \u201cMcDonald\u2019s then broke off its contact with us, and inserted a foreign sub-franchisor that makes its own rules. That company degraded services, abandoned the advertising cooperative, stopped paying to the joint advertising fund, opened its own restaurants close to ours and took our customers away.\u201d<\/p>\n

    Moyett added, \u201cMcDonald\u2019s decided to make a financial experiment in Puerto Rico at our expense. We don\u2019t know whether we are a pilot plan for things to come in the U.S. mainland, but this experiment is destroying our livelihoods.\u201d<\/p>\n

    Jas Dhillon, a 7-Eleven franchisee from Los Angeles, echoed concerns raised by McDonald\u2019s franchisees regarding the unchecked power of franchisors: Dhillon described how South Asian immigrant franchise operators at 7-Eleven have been targeted for abuse by the company, facing threats and intimidation, with many ultimately losing their business altogether after the company decided to resell their stores in a churning program revealed by a management whistleblower to other higher-paying operators.<\/p>\n

    \u201cThe franchise sector bills itself as a path to the American Dream, but the truth is that franchisors like 7-Eleven and others have made this business into a trap,\u201d said Dhillon. \u201cFranchisors hold all the power, and so they can churn through one operator to the next, leaving us with nothing while their profits continue to soar.\u201d<\/p>\n

    And Kathryn-Slater Carter, a former McDonald\u2019s operator from California, described losing her business last year after she spoke out about the need to reform the franchise industry.<\/p>\n

    \u201cJust like that, McDonald\u2019s took away a business that my husband and I had spent our lives building together,\u201d said Slater-Carter. \u201cWe had nowhere to turn \u2014 we were voiceless. Companies like McDonald\u2019s have left franchisees no choice but to stand together and demand change and that\u2019s why I am supporting the call for an FTC investigation. The industry needs reform now.\u201d<\/p>\n

    The call for change comes as the franchise industry grows. Franchised businesses represent a large and expanding segment of the nation\u2019s economy, making up almost 11 percent of businesses with employees, employing an estimated 9.1 million people, and consistently adding jobs faster than non-franchised businesses in recent years.<\/p>\n

    \u201cThe substantial evidence of pervasive franchisor abuses presented in the petition demonstrates an urgent need to reform the growing franchise sector\u2013for the benefit of workers and franchisees alike,\u201d said Scott Courtney, assistant to the president of SEIU. \u201cAn FTC investigation could help curb harmful and predatory franchisor practices, giving franchisees space to create good jobs and grow the economy.\u201d<\/p>\n

    In addition to filing the petition, SEIU is supporting efforts by franchisees in California to pass the Small Business Investment Protection Act, a bill that protects franchisees against\u00a0unfair terminations, allows franchisees to monetize their equity when franchisors refuse to renew franchise agreements, and protects franchisees\u2019 ability to sell or transfer their units. The State Assembly passed the bill with overwhelming support last week.<\/p>\n

    In California and beyond, the franchise sector faces heightened scrutiny. More than one in six franchise loans made over a 20-year period has ended in failure, according<\/a> to a recent analysis of data from the U.S. Small Business Administration. A recent poll<\/a> by FranchiseGrade.com revealed more than half of franchisees say they can\u2019t earn a living from their businesses. And a recent survey<\/a> of McDonald\u2019s franchisees by Janney Capital Markets found record-low confidence among franchisees in the company\u2019s 6-month business outlook.<\/p>\n<\/div>\n

    This piece was reprinted by RINF Alternative News<\/a> with permission or license.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

    (Common Dreams) –\u00a0WASHINGTON – Citing evidence of a dramatic power imbalance between the nation\u2019s top franchisors and their franchise operators, the Service Employees International Union petitioned the Federal Trade Commission Monday to launch an investigation into the franchise sector and issue recommendations for curbing \u201dabusive and predatory\u201d practices by franchisors in the $800 billion industry. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[519],"tags":[],"class_list":{"0":"post-152022","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-newswire"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/152022","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=152022"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/152022\/revisions"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=152022"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=152022"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=152022"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}