F.T.C. Public Comment 38

…I was required to sign a broad form general release of all claims in order to be granted the additional time. You must understand that when one is trying desperately to save one's business, one's entire livelihood, you are willing to do almost anything.

FTC.jpg

U.S. Federal Trade Commission
April 27, 1997

Public Comment
Teresa Maloney, franchisee

Request for public comment on possible revisions to The Franchise Rule.

Comment #38

NATIONAL COALITION OF ASSOCIATIONS OF 7-ELEVEN FRANCHISEES

April 27, 1997

Secretary
Federal Trade Commission
Room 159
Sixth Street and Pennsylvania Avenue NW
Washington, D.C. 20580

Re: 16 CFR Part 436

I currently serve as Executive Vice Chairman of the National Coalition of Associations of 7-Eleven Franchisees which represents 2000 of the 3000 franchised 7-Eleven store owners in this country. I am also Chairman of the Nevada Delegation to the White House Conference on Small Business and an active member of the American Franchisee Association. My 14 years as a 7-Eleven Franchisee coupled with 8 years of involvement with Franchisee issues in arenas outside the 7-Eleven system, I believe make me qualified to comment on proposed revisions to the Franchise Rule.

More often than I choose to remember I have heard franchisors tell Franchisees they are "protected" by the FTC. You and I both know the truth is that the FTC Rule is a pre-sale disclosure rule only and does absolutely nothing to protect a Franchisee after he or she has signed the contract. The pre-sale process is a "honeymoon" period when the franchisor is simply wooing a prospective bank account and the potential Franchisee is hoping against hope that he or she will be "qualified" or "accepted" to become part of the franchise system. When you are on the threshold of living the American dream of owning your own business, and the party with greater power holds the keys that unlock that door, all you want is to be "accepted". Generally, you don't ask the hard questions because you don't want to be perceived as a "problem" before you even get the keys.

It is well past time that the FTC begins dealing with the substantive issues of Franchisees that occur once the relationship has begun and the contract has been signed. Let me give you just two examples from my own experience as a Franchisee:

1) The franchise agreement I operated under required the Franchisee to maintain a minimum net worth in the business. There came a time when although I had over $16,000 net worth in the business, it was not the minimum amount required. Southland Corporation was willing to work with me to extend the time to reach that net worth from "immediately" to four months. However, I was required to sign a broad form general release of all claims in order to be granted the additional time.

You must understand that when one is trying desperately to save one's business, one's entire livelihood, you are willing to do almost anything. The FTC must prohibit franchisors from requiring current, renewing and outgoing Franchisees to sign broad form general releases and waivers. This has become the most common practice of franchisors today and must be stopped. I believe it is a violation of basic legal and constitutional rights.

2) When it became apparent to both me and the Southland Corporation that it was time to terminate our business relationship, we began negotiating my exit from the system. We came to a mutually acceptable agreement, however the agreement contained a confidentiality clause. Even if my name appears in a UFOC as a former Franchisee, how much help can I give to anyone asking a question?

Finally, let me comment that I believe mandatory arbitration clauses must be completely eliminated. Mediation and arbitration resolve only one Franchisee's problem. They create no precedent, and many results are sealed. They are of absolutely no benefit to anyone experiencing the same or a similar problem, and they contribute greatly to a franchisor's ability to continue abusive patterns.

Every American ought to have the right to a trial by jury-including a Franchisee.

Thank you for the opportunity to comment.

Sincerely yours,

TERESA MALONEY
Executive Vice Chairman

West Coast Office:
543 Ridge Street
Reno, NV 89501
Telephone: (702) 323-6662
Facsimile: (702) 323-8444

For Review, see FTC “Table of Commenters”
http://www.ftc.gov/bcp/franchise/comments/tabcomm.htm


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