NATIONAL COALITION OF
OF 7-ELEVEN FRANCHISEES
April 27, 1997
Federal Trade Commission
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
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
requiringcurrent, 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.
Executive Vice Chairman
West Coast Office:
543 Ridge Street
Reno, NV 89501
Telephone: (702) 323-6662
Facsimile: (702) 323-8444