Hern participates in Federal Trade Commission virtual workshop
Tulsa, OK , November 10, 2020
Representative Kevin Hern (OK-01) joined the Federal Trade Commission for a virtual workshop exploring issues surrounding the FTC’s Franchise Rule leading up to the negotiation of a new Franchise Rule.
With Rep. Hern’s experience as a McDonald’s franchisee, he brings a unique perspective as both a lawmaker and a business owner who has operated under the FTC’s Franchise Rule.
Rep. Hern’s remarks as prepared:
For over 30 years, I have been involved in the McDonald’s franchisee program. After spending a year as an Aerospace engineer, a job that was cut short by the Space Shuttle Challenger disaster, I had the opportunity to get into the McDonald’s program by working for a long-time franchisee who owned six restaurants in Little Rock, Arkansas.
I was the chairman of the Owner/Operator leadership group for all of the 4,000 U.S. franchisees at the time. My role allowed me to see early on how a franchisor/franchisee is paramount to the overall success of any franchised brand.
I worked for 10 years to save $100,000 to buy my first McDonald’s restaurant.
In 1997, I became a franchisee and have owned 24 restaurants over the past 24 years. My family currently operates the remaining five restaurants in the Tulsa area.
Prior to running for Congress in 2017, I served for 13 years on the McDonald’s National Leadership Council. Eight years as the Ombudsman and five years as the CFO. I saw first-hand how a ‘firm but fair’ franchisee agreement not only protected the intellectual properties of the franchisor, but also the equity of the franchisees.
In fact, I have often said that franchising relations is much like the interactions of the states with the federal government. The ‘people’ are best represented by our Republic when each entity (state/ federal, or franchisor/ franchisee) stays in their appropriate lanes of responsibilities and acts within their limitations of good governance.
It is incumbent for each party to desire strong partnership. Therefore, an FDD must be restrictive enough to create a natural selection process of only the best franchisee candidates for that particular brand.
Once the franchisee agrees to the terms of the FDD, it is necessary for all parties to work within that document as relationships move forward.
I have spoken a lot about the similarities of the franchising model as compared to the U.S. government. The relationship between the states and the federal government is bound together by the framework of the U.S. Constitution. We have elected politicians that debate the merits of the ideas contained in our great governing document.
The relationship between the franchisees and the franchisor is bound together by, initially, the FDD and, ultimately, the Franchise Agreement. Most of the brands have elected representatives that debate the merits of the ideas contained in their Franchise Agreement.
So, as you go about your work in reviewing possible updates to the FDD, I would ask that you keep the thought in mind that there must be a balance in the responsibilities as to each party in the relationship.
Each franchisor needs to represent, or sell, it’s brand to the prospective buyer without over promising or misleading the potential franchisee.
The franchisee needs to take the necessary steps to do proper due diligence in making what will most likely be the greatest career change they will ever experience.
I believe the current FDD has functioned effectively over the past decade, so I would encourage that your review makes very few changes.
Franchising has been a life changer for many, including myself. It allowed a person who grew up very poor to work hard and become extraordinarily successful.
I thank you for allowing me to share my thoughts on the importance of the franchising model. It has given thousands of aspiring businesspeople the opportunity to realize the American Dream.