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7-Eleven Franchisee Group Urges FTC to Investigate Franchising

Asking agency to compel 9 chains to respond to requests on supply chain, advertising funds, financial performance representations
National Coalition of Associations of 7-Eleven Franchisees (NCASEF)

SAN ANTONIO — The National Coalition of Associations of 7-Eleven Franchisees (NCASEF), in cooperation with Keith Miller of Franchisee Advocacy Consulting, has filed a petition with the U.S. Federal Trade Commission (FTC) requesting an investigation of the franchise industry. The petition asks the FTC to compel nine major franchise chains to respond to 115 requests for information in 14 categories, among them: supply chain, advertising funds and financial performance representations.

The petition recommends the FTC send requests for information to 7-Eleven Inc.; Subway; The UPS Store, Inc.; IHG Hotels and Resorts; Choice Hotels; Experimax/Experimac; Supercuts; Massage Envy; and Dickey’s Barbecue Pit.

The petition has the endorsement of 11 independent franchisee associations, said NCASEF.

Petitioners are hoping the investigation will prompt the commission to extend federal regulation of the industry beyond the presale financial disclosures franchise companies are already required to make, NCASEF said.

“This petition provides the opportunity for the FTC to take a proactive role in assessing the franchise industry,” said Keith Miller, principal at the Meadow Vista, Calif.-based consultancy. “We are requesting the FTC look broadly at the imbalance of power in our industry today.”

In April, Sen. Catherine Cortez Masto (D-Nev.) released a comprehensive report on franchising, which highlighted problematic areas in the industry and asked for increased oversight from the FTC. In June, Rep. Jan Schakowsky (D-Ill.) sent a letter to the Government Accountability Office (GAO) requesting a study of inadequacies in the current FTC’s Franchise Rule.

Thomas Ayres, a senior attorney with NCASEF law firm Witmer Karp Warner & Ryan, who co-wrote the FTC petition, said, “Franchisors often engage in predatory behavior after franchisees sign their contracts, but the FTC rarely investigates post-sale activities when franchisees are more vulnerable and captive to their franchisors.”

Ayres said current business conditions, exacerbated by the global pandemic, further highlight the need for closer examination of franchising. “The additional strains the pandemic has put on franchisees across all industries has brought into sharper focus the need for further investigation and action,” he said.

“7-Eleven Inc. remains committed to supporting franchisees,” the retailer said in a statement provided to CSP Daily News. The Irving, Texas-based company is No. 1 on CSP’s2021 Top 202 ranking of U.S. c-store chains by size, with 9,519 stores. “Since the start of the COVID-19 pandemic, we have provided more than $185 million in incremental support for franchisees as they operate as essential businesses. The commitment by 7-Eleven franchisees to serve their customers and communities during this challenging time is heroic. That commitment is paying off. Franchisees are experiencing the strongest increases in sales, margin and gross profit performance in over four years. In fact, less than 5% of stores turned over in 2020, which is consistent with our standard turnover rate for the past 10 years.”

Click here to view the petition.

NCASEF is an elected, independent body representing the interests of more than 7,400 7-Eleven franchised locations in the United States. Originally founded in 1973, it is comprised of 41 separate independent franchise owner associations collectively having more than 4,400 7-Eleven operators as members.

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