The Fair Trade Commission (FTC) is set to enhance the negotiating power of franchisees by clarifying the registration requirements for franchisee associations and the consultation process with franchisors. Associations with more than 10% of franchisees as members will find it easier to register with the FTC, while those with membership below 30% will need to gather opinions from non-member franchisees.
On August 3, the FTC announced that it will issue an administrative notice for the amendment of the Franchise Business Act enforcement decree by September 14, and for the establishment of guidelines regarding the registration of franchisee associations and the consultation process by August 24. This follows the revised Franchise Business Act, which mandates the registration of qualifying franchisee associations and requires franchisors to consult with these registered associations. Franchisors that fail to comply may face corrective orders.
According to the amendment, a franchisee association can register with the FTC if it has at least 10% of franchisees or more than 1,000 members. The FTC has set a minimum membership requirement of 30 members, considering the lowered membership ratio of 10%. This aims to reduce the burden on small franchisors while ensuring meaningful consultation opportunities for franchisee associations.
When registering, associations must submit a registration application, and if there are changes, a change registration application. They can also request consultations with franchisors regarding franchise agreements and advertising or promotional activities.
If a registered association with less than 30% membership requests a consultation, it must first gather opinions from non-member franchisees. The association is required to announce the consultation topic, its opinions, and the method for submitting feedback, and then relay the results to the franchisor.
To prevent repeated consultation requests, the amendment includes restrictions. Once a registered association has consulted on a topic, it cannot request the same topic again for 180 days. Requests for different consultation topics will be limited to 60 days. For franchisors with fewer than 100 franchisees, the restriction period is 90 days.
This amendment is expected to empower franchisees to negotiate fairly with franchisors, helping to prevent unfair trading practices and improve transaction conditions in the franchise sector. The FTC believes that by clearly regulating the registration requirements and consultation procedures for franchisee associations, concerns from franchisors about the proliferation and indiscriminate consultation requests from these associations will be significantly alleviated.
The FTC stated, "To prepare this amendment, we have continuously engaged with stakeholders through meetings and discussions throughout the first half of this year," adding that it will carefully review the feedback received during the legislative and administrative notice period to ensure the smooth implementation of the revised Franchise Business Act, aiming to complete the amendment of the enforcement decree and the establishment of guidelines within the year.
* This article has been translated by AI.
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