With a renewed focus on bad actors within the franchise industry, the US Federal Trade Commission (FTC) took a significant step this week when the Department of Justice (DOJ) filed suit against franchisor Burgerim alleging in a four-count lawsuit that the company violated Section 5 of the FTC with false and misleading representations to potential franchisees; violated the Franchise Rule by not disclosing required information in the FDD; also violated the Franchise Rule by not providing the requisite Financial Performance Representations; and further violated the Franchise Rule with claims and representations contradicting a required disclosure. The case is particularly significant in that it is coming in the wake of a critical report by Nevada Senator Catherine Cortez Masto (D-NV) from April 2021 that called for significant reforms to franchising and strong action against franchisors for these exact violations – unfair and deceptive contracts, and false information and a lack of transparency in FDDs. Senator Cortez Masto also pushed the agency particularly hard for not protecting the franchise owners from predatory franchisors. The FTC took the Senator’s concerns to heart and as we advised you a few weeks ago, it now has a functioning complaint portal live on its website where franchisees can easily file complaints against a franchisor for predatory actions in violation of the franchise agreement or the FTC’s Franchise Rule. In taking the action against Burgerim, the Department of Justice (DOJ) is seeking a permanent injunction against the company as well as monetary relief and civil penalties for each individual violation of its franchise rule.