The Franchisee Bill of Rights
On the subject of “fairness” in franchising, we will try to separate the optimists from the pessimists . Hopefully, we will make an optimist out of even the most cynical readers amongst us.
We begin with a simple question: Which of the following is the most likely to occur first?
a) America’s leading franchisors will voluntarily embrace the “Franchisees’ Bill of Rights” that has been published by the Coalition of Franchisee Associations (see here)
b) The U.S. Congress will pass comprehensive “fair franchising” legislation (or the Federal Trade Commission will enact a new regulation) that effectively implements the Bill of Rights and makes further efforts by franchisee association leaders unnecessary.
c) The U.S. Supreme Court will decide a “fair franchising” case that establishes, once and for all, that contract provisions to which franchisees usually object are “unconscionable” because they “shock the conscience” of the Court.
d) None of the above.
Here’s hoping that you rejected (d), which obviously would be the pessimistic view, and made your selection among (a), (b) and (c). After all, it is pretty clear from medical science that optimists tend to live longer.
And for all of you optimists out there, I predict that the correct answer is (a), that sooner or later (and hopefully sooner) the franchisor community will voluntarily embrace the Bill of Rights, either as a whole or in substantial part.
Freedom of Association
The first of twelve rights that franchisee advocates insist ought to be mandatory for every franchisee is that “A franchisee may freely associate with other franchisees or associations.”
This right deserves to be the first one on anyone’s list, as it strongly evokes the spirit of the First Amendment in the Bill of Rights to the U.S. Constitution, in which every American is guaranteed the freedom of speech and the right to peaceably assemble and to petition the government for a redress of grievances (in addition to providing for the freedom of the press and for religious liberty).
As Americans we sometimes take our fundamental liberties for granted. None of us, I assume, would ever tolerate living in a country in which citizens are denied the right to talk to each other about matters of common interest under the threat of being arrested or worse.
By the same token,why should any franchisee be deprived of the right to speak to other franchisees about matters of common interest and to “peaceably assemble” in an independent association and to “petition” the franchisor to “redress grievances?”
From this perspective, efforts by franchisors to prevent their franchisees from forming independent franchisee associations, which facilitate communications among franchisees and with the franchisor, seem downright un-American. Worse, such efforts often do nothing more than drive the franchisees underground, into anonymous Internet chat rooms and the like, where the things that are said in darkness are usually worse, in the sense of being destructive and not constructive, than anything that is said in the light of day.
To be clear, we are talking about the right of franchisees to form independent associations that are incorporated under state law and have a legal existence independent of the franchisor. Franchisor-sponsored advisory councils may be fine as far as they go, but often they are no substitute for an association that is truly independent.
In its amended franchise rule, the Federal Trade Commission gave the cause of independent franchisee associations a well-needed boost when it provided that franchisors must disclose whether an independent association exists in its system, and on request the franchisor must disclose the contact information for the association as part of Item 20 in the Franchise Disclosure Document. (See 16 CFR 436.5(t)(8)).
The question every franchisee or potential franchisee should be asking is: Do I want to be in business with a franchisor that is hostile to the very basic right of forming an independent association? And by the same token do I want to be in a system with other franchisees that might be too lazy or timid to start one?
Of course, if the answer is that everyone is too busy making tons of money to bother with an association, you might decide to proceed anyway. But history shows that independent associations play a vital role in good times as well as bad. They are a vital ingredient to healthy franchise systems that no franchisee should be without.
Top 5 Reasons to Join an Emerging Franchise
Investing in any franchise is a risk. You’re counting on franchisors for guidance; other franchisees for support and you’re investing a ton of money to build your business. Now add the risk factor of investing in an emerging franchise, a franchise with only a few franchisees. Does it add risk? Maybe, but there are far more benefits of investing in an emerging franchise that the little added risk, is a fleeting concern. Your voice is not only heard by the franchisors, but it’s also helping to make positive changes for future franchisees. Take a extremely large franchise such as, McDonalds or Hilton. Can you imagine a franchisee picking up the phone to call the President of the company to share an idea they had on how to make franchisees daily operations more efficient? In an emerging franchise, you are able to have a close relationship with the corporate team behind the concept and your ideas will be taken seriously. They believe in you as much as you believe in them. Here are five more reasons to join an emerging franchise:
12 Questions You Must Ask When You Interview Existing Franchisees
Even the most honest and forthcoming franchisor can’t tell you what it’s like to be a franchisee. You should take the time to call existing franchisees and get some candid answers to your questions. Be careful that you don’t get a limited list of hand-picked contacts. It would be a waste of time to talk only to the most successful operators or those who are coached to give the “right” answers. Calling franchisees at random will give you the clearest picture of what you’re getting into. Here are some questions you should ask.
4 Signs a Franchisor May Not Be Around for the Long Haul
A critical part of the due diligence process for prospective franchisees is trying to discern (to the extent reasonably possible) whether the franchisor will be around for the long haul. After all, much of what you pay for in a franchise opportunity is the right to be associated with the franchisor’s brand and system, the right to use the franchisor’s proprietary materials, and in some cases, the right to an exclusive territory. If the franchisor goes out of business, all of these rights go up in the air (if not out the window), and you may well be left in a worse position than if you had just gone into business on your own in the first place.