Vermont lawmakers hear DFR briefing on franchising; committee to gather more data before pursuing regulation

Members of the Vermont House Committee on Commerce and Economic Development heard on Jan. 6 from Kai Samson, commissioner of the Department of Financial Regulation, and Joe Valente, introduced at the hearing as director of policy at EFR, about a department review of franchise–franchisee relationships and possible state responses.

Samson and Valente told the committee the department’s research found very little Vermont-specific data and that many franchise contracts are confidential, limiting the state’s ability to assess harms. "We don't have very much that is specific to Vermont," Valente said, summarizing the report's central limitation. The DFR team relied largely on national materials and a single public contract that surfaced because of federal litigation.

The briefing laid out two main policy paths for the legislature: create a franchisor registration program (14 states currently use some form of registration) or identify and prohibit specific contract provisions that states deem harmful — for example, long-term noncompetes, clauses restricting franchisee communication, or onerous choice-of-law and venue provisions. Valente noted that registration programs can range from simple filing systems to resource-intensive merit reviews; "Rhode Island…has one full time employee whose only job is to process the…filings," he said, illustrating staffing needs for even modest review workloads.

Committee members pressed DFR on practical questions: whether franchise disclosure documents or full contracts must be filed, whether tax or business-registration records can identify franchise relationships, and how many filings a regulator might expect. Valente said franchise disclosure documents are commonly used in other states’ systems but that Vermont’s business-registration data currently does not reliably flag franchise businesses or link them to parent franchisors. He estimated franchisor filings in other states can be "in the hundreds" or even over 1,000, while complaint volumes reported by jurisdictions with registration programs ranged from one or two a year to about a dozen.

On enforcement and authority, Samson and Valente cautioned that DFR currently lacks legal power to compel production of private franchise contracts for review and that many disputes end in arbitration, which can keep contract terms out of the public record. "We're not their regulator," Samson said, explaining why the department could be limited in accessing private agreements.

Because of limited Vermont-specific data and the resource implications of a registration-and-merit-review system, DFR recommended the committee pursue incremental steps to improve data collection before creating a regulatory scheme. Members expressed support for inviting the Secretary of State to consider adding a checkbox or data field to business-registration forms to identify franchise businesses and for asking the Attorney General’s office to clarify how consumer-protection statutes might apply to franchise disputes.

Chair Mike Markov said the committee will invite David from the Secretary of State’s office and Chris from the Attorney General’s office to brief the committee. The chair also noted he has a DFR housekeeping bill and another bill in draft and encouraged members to review them for potential sign-on. No formal legislative action or vote on franchise regulation occurred at the Jan. 6 meeting.

Next steps: the committee will seek briefings from the Secretary of State and the Attorney General and consider targeted data-collection steps before drafting substantive franchise regulation.