This month, we feature a strong advocate for franchisees, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, who was nominated by President Biden and assumed office on October 12, 2021. Prior to that, Director Chopra served as a commissioner at the Federal Trade Commission, an agency that provides oversight on the Franchise Rule, which is the presale disclosure requirement in franchising. In 2020, Commissioner Chopra became a vocal presence in the franchise space. As some advocates have put it, he brought the word “franchise” back into the FTC’s vocabulary.
Anyone who at tended AAHOACON22’s final morning’s General Session had the honor of hearing Director Chopra as he was interviewed onstage by then-AAHOA Chair (2021-22) Vinay Patel. The audience was treated to someone not going through a set script or talking points, but someone who could freely and intelligently discuss many of the issues confronting franchisees. To follow up on his appearance at AAHOACON22, Today’s Hotelier recently caught up with Director Chopra to get additional insight on his views of the brand-franchisee relationship.
Director of the Consumer Financial Protection Bureau Rohit Chopra
TELL US A LITTLE BIT ABOUT WHERE YOU’RE FROM AND WHERE YOU WENT TO SCHOOL.
I was born in Plainfield, NJ, and my parents both immigrated from India around 50 years ago. I attended public schools and obtained my undergraduate degree from Harvard and an MBA from the Wharton School at the University of Pennsylvania.
YOU HAVE MORE A BUSINESSCENTRIC BACKGROUND, SO WHAT MADE YOU GO INTO GOVERNMENT?
The subprime mortgage crisis and the meltdown of the economy really had a deep effect on me. I saw how a lot of homeowners and businesses were destroyed by it, while many of the firms directly involved with risky lending got bailouts. It made me wonder why the regulators were ignoring obvious warning signs and not taking action.
IT HAS BEEN DECADES SINCE AN FTC COMMISSIONER WAS INTERESTED IN FRANCHISING. WHAT CREATED YOUR INTEREST IN THIS AREA?
Franchising is such a terrific way for individuals to launch their own enterprise, especially when they’re a first-time business owner. When I arrived at the Federal Trade Commission, I was surprised that the agency’s commissioners had largely ignored some of the obvious problems plaguing the market for a number of years. We were lucky to speak with a number of franchisees who told us about how franchisors were using their power to exert more control. While we knew the problems wouldn’t be fixed overnight, we put in a lot of energy to revive the FTC’s oversight.
DURING YOUR TALK AT AAHOACON22, YOU MENTIONED YOU FELT THE FRANCHISE DISCLOSURE DOCUMENT SHOULD BE LOOKED AT AS MORE OF A WARRANTY OVER THE LIFE OF THE FRANCHISE CONTRACT, NOT JUST A SINGLE SNAPSHOT IN TIME. COULD YOU ELABORATE MORE ON THAT?
Franchise disclosures are undoubtedly an important way for entrepreneurs to choose the right business opportunity. But, disclosures are no good when the offeror can simply change the terms as they please. Unfortunately, many franchisees are finding that the rules are changing all the time, and these changes always seem to benefit the franchisor at the expense of the franchisee. If a franchisor is making promises in the franchise disclosure document, they should live up to them.
WHAT SPECIFIC AREAS SHOULD FRANCHISEES LOOK TO THE CFPB FOR ASSISTANCE? AND HOW BEST CAN THEY ENGAGE THE CFPB?
The pandemic accelerated the shift away from cash and toward electronic payments. Many small businesses are frustrated by the commissions and fees they’re paying to process credit-card and debit-card purchases. Some franchisees may even be forced to use a particular processor affiliated with their franchisors. We want to work with franchisees and other small businesses to make sure they can accept different payment methods without paying excessive fees.
We’re also looking to make sure small business lending is fair, transparent, and competitive. Many franchisees had difficulties obtaining Paycheck Protection Program loans. We will be implementing some new rules required by law to collect information from banks and other small business lenders about their lending. This data will help to make sure small business loans are available to those who qualify.
Operators of franchised businesses can connect with the CFPB by reaching out to us directly or through AAHOA. I also encourage everyone who needs help resolving an issue with a financial product to file a case with us at www.consumerfinance.gov/complaint.
GIVEN ALL OF THE ISSUES AND CHALLENGES FRANCHISEES ARE DEALING WITH, WHAT ARE YOU HOPEFUL ABOUT?
The pandemic destroyed many small businesses, and unfortunately many are gone. However, I think many people in Washington are starting to realize that many of the rules are designed to help big businesses get even bigger at the expense of small businesses. This is not a partisan issue and it doesn’t affect just franchisees. I hear the same challenges from small pharmacies, small banks, and many other small businesses. I think the tide is turning, and I’m hopeful we can see some change.
WHO HAVE BEEN YOUR ROLE MODELS YOU CREDIT FOR YOUR SUCCESS IN YOUR CAREER?
I was very fortunate to have so many schoolteachers who showed me that it wasn’t just about studying, it was also about listening and empathizing with others and their experiences.
, Principal, Franchisee Advocacy Consulting, is an independent consultant dedicated to advancing franchisee causes through engagement and advocacy. He can be reached at (530) 906-3988 or [email protected].
