FRANdata Supports IFA Position on FTC Franchise Rule

April 18th, 2019 by Anya Nowakowski

As part of the FTC seeking public comment on its review of the franchise rule, the IFA is sharing insight into the experiences of franchisors and franchisees. The IFA believes that in light of the unity of support communicated by its franchisee, franchisor, and supplier members, it strongly endorses continuation of the Rule in substantially its current format. FRANdata supports IFA’s stance by providing insight through the following analysis:

  • Over the past 10-plus years since the Rule was last amended in 2007, the number of franchised units has skyrocketed 16% from 381,890 outlets to 441,300 outlets.
  • Market forces have driven franchisors to provide increasing transparency into their systems’ financial performance disclosures, with 66% of franchisors disclosing revenue information in their Item 19 in 2017 compared to only 52% in 2014. Furthermore, franchisors have improved the quality of their disclosures and the level of transparency into unit financial performance under the Rule’s current framework. Forty-seven percent (47%) of franchisors with an Item 19 disclose operating expenses, and 34% provide some measure of profitability, including operating income, net income, or earnings before income, taxes, depreciation, and amortization (EBITDA). Since 2014, almost half of franchisors have increased the sample basis of their reporting to include a larger portion of their franchised system, on average, representing 77% of their franchised system. For access to the complete study click here.

Categories