Franchisee Trade Associations

Jim Coen August 11, 2016 Leave a Comment

The Importance of Franchisee Independent Trade Associations

Franchisees invest in franchise systems for many different reasons. One reason franchisees universally share is that they are joining something so they will not be alone to solve the myriad of business challenges they will face.

A business owner today needs to understand and deal with issues that just didn’t exist 25 years ago. From complicated tax issues, to complicated labor laws and insurance needs. In marketing alone: advertising, online, social media and public relations have all drastically changed the marketing dynamics.

Many feel franchise systems can provide assistance in these difficult areas. The reality is most franchisors are in a very different business than their franchisees. The business of running a franchised unit is extremely different that running a franchise system. Many of the franchisor’s employees including the C-Suite level have never operated a franchised unit. Most C-Suite’s change every 5-7 years. The institutional memory is lost to the franchisor but remains with the franchisees that tend to be in the system longer that many of the employees of the franchisor.

The reality is franchisors are in a different business and have an entirely different set of challenges that are not a part of running a franchised unit.

Independent Franchisee Associations (IndFA) typically form from the imbalance in the relationship. A single unit franchisee may have a difficult time changing the status quo on their own. Many of the multi-unit franchisees feel they have different needs, yet they also have the same serious concerns about their investment because of the way onerous franchise agreements are.

Most IndFA’s talk about creating one voice, creating more leverage in negotiations, developing resources to defend franchisee from predatory franchisor practices. Franchisees typically don’t have the knowledge on how to set-up an IndFA. Some franchisees were members of a union so they understand that 1+1=3, and the unions empower workers to act as one they could do the same for franchisees. But most franchisees come from the corporate world and have little experience running a small business.

Franchisees run a business and as stakeholders, they are directly affected by the customer’s perception of the brand. Although many of the reasons listed above are all good reasons to form an IndFA. The most important reason to create a franchisee association is the need and power of creating a shared knowledge base of the branded business from the franchisee perspective. That is something very hard to obtain other than forming an IndFA. Most Franchisee Advisory Councils don’t even let franchisees take notes, never mind discussing the matter in full.

Forming an IndFA is easier said than done, but the benefits of Independent Branded Trade Association can help the stakeholders in the brand improve the product, profitability, market share and brand recognition.

Branded Trade Associations can help foster collaboration seek transparency and empower franchisees to have a positive impact on the brand they have chosen and have dedicated their money, heart, and soul.

When I run into a franchisee, and they ask me why they should form a franchisee association my typical answer today is “if you want to succeed, decades to come, you don’t have a choice. You must unite franchisees as an essential part of the successful franchise systems to ensure that the franchisees have as much knowledge of the business and the future risks of running the franchised units.” Otherwise, you are putting your business lifeline in the hands of someone that is in a different business and possess an onerous franchise agreement that offers you nothing more than my way or the highway.

Forming an Independent Franchisee Trade Association will not solve all issues, there are multiple sides in the franchise relationship, vendors, franchisees, franchisor, customers, employees, and suppliers. What matters is the Association will be able to share similar experiences from other franchisees. Independent Franchisee Trade Associations will provide you access to information to help you have a say in the direction the brand and company may take.

At Franchise Perfection we help interested parties to form independent franchisee associations. We provide startup and ongoing management services necessary to establish and operate independent franchisee associations.

For more information contact Jim Coen at jim@franchiseperfection.com or call 617-469-3002.

Jim Coen January 9, 2015 Leave a Comment

Franchising Could Change Forever…

Image credit: Keoni Cabral | Flickr

Jason Daley writes in Entrepreneur Magazine that legal issues could change franchising forever.

He writes:

Franchising usually makes it into the mainstream press when Taco Bell jams a new snack chip into its burritos. But in the past year, franchising has been making front-page news for other reasons: Several issues that have been simmering for years came to a head, pitting franchisors against franchisees and labor advocates against both.

The results of those conflicts—and their ultimate consequences for franchising as a whole—aren’t at all clear, obscured by hyperbole, legalese and a lack of guidance from regulators. Whether these issues will reshape franchising for the better, as some argue, destroy franchising as we know it—or change nothing at all—remains to be seen. Whatever the case, the legal and political fights are worth watching.

I was interviewed for this article well over 8 months ago and forgot about the interview until it popped up in my google alerts.

At the time I was the Executive Director of the Maine Franchise Owners Association (MFOA) currently I serve as a member of the MFOA Board of Directors.

“What’s happened is that over the years, attorneys for franchisors have tightened franchise agreements to the point where franchisees don’t really own any equity in their business,” explains Jim Coen, executive director of the Maine Franchise Owners Association, which supported the bill in Maine. “When push comes to shove, in most franchise agreements franchisees don’t have anything but the equipment they buy. They have no right to the name, to their customer base, and because of noncompete clauses they can’t use the skills they’ve learned. Yet franchising sells units by telling people they can be in business for themselves.”

Later on in the article I was also quoted as saying:

Coen of the Maine franchise owners’ group agrees that the minimum-wage movement is about union power, but he believes it also ties into fair franchising legislation and helps explain why the SEIU supported SB 610 and other franchising acts that improve franchisee equity. “The unions realize that if they can help franchisees increase their margins, then the franchisees can pay their employees a higher wage,” he says. “And I really think franchisees will pay higher wages instead of pocketing that income. The customer service experience at the counter is so important, franchisees want the best people they can get. The ones making minimum wage are cleaning tables or in the back. Franchisees shouldn’t be afraid of unions. They should be worried about protecting their equity.”

In the last sentence of my quote what I meant to say or thought I said was “Franchisees shouldn’t be afraid of the minimum wage. They should be worried about protecting their equity”.

Not a big difference but an important one.

Why are Franchise Relationship Bills Showing Up in So Many States?

From Left to right, Tim Bryant, Greg Rudenstein, Jim Coen, and Rory Valas

On Wednesday evening 10-1-2014, at a meeting of the New England Franchise Association, I served on a panel of four that discussed “Why is Franchise Relationship legislation popping up across the country?” There were three attorneys on the panel: Tim Bryant, Preti Flaherty, Portland, ME, Gregg Rubenstein, Nixon Peabody, Boston, MA; and Rory Valas, Valas Law, Boston, MA. The moderator was Suzanne Cummings, Cummings Law, Stoneham, MA.

The discussion was civil to a point and in particular Gregg Rubenstein did a good job questioning the validity of these laws and the problems they are supposedly trying to solve, he denied that a problem exists. Rory Valas also did a good job of articulating how “bad acting franchisors” take advantage of franchisees. He shared a number of common legal clauses that are unconscionable in that the outcome to franchisees is devastating. Rory informed the audience that the unconscionable franchise agreement clauses are not typically found in other business contracts. Often those business contracts are protected by common law, where franchise agreements are not.

Tim Bryant of Preti-Flaherty sounded more like an IFA lobbyist than an attorney. He stated false statistics as well as the unfounded claim that these laws are being introduced by “wealthy franchisees” that are funding these initiatives for their personal gain.

Not only was I astounded at his accusations. I also found his arguments to be ill-informed, false, hostile and provocative.

On the contrary, I tried to represent that collaboration and transparency to the transaction is the real need and that Independent Franchisee Associations can create leverage and obtain more balance than most laws can. With that said, basic laws can raise the bar for franchisors to treat franchisees with “good faith and fair dealing” and help attract more buyers that have turned away from franchising over the last 8-10 years.

The clip above is of Tim Bryant of Preti-Flaherty from Portland, Maine accusing rich franchisees of supporting a law in Maine only for their self-interests, which is far from the truth. The reality is a Franchise Relationship Law is not retroactive. It will not have an effect on existing franchise agreements. The law if enacted will only effect franchise agreements signed after the enactment of the law. So wealthy franchisee self-interest is a moot point. Besides dubious franchisors prey on the small franchisees who can’t afford to fight back.

The basic premise of these laws is that today’s franchise agreement do not allow franchisees to build, harvest or perpetuate their equity. In the clip below Tim Bryant correctly points out that under today’s franchise agreements the equity belongs to the franchisor. Franchisees, listen to what Tim Bryant says. He is speaking the truth, and I and other pro franchisee advocates have been telling you this for years.

That is exactly why state laws have been introduced nationwide to protect, enhance and defend franchisee equity. Fair franchise bills will continue to be introduced in state capitals nationwide.

Most franchisees feel that they do in fact deserve and do own the equity they have accumulated in their franchise. Many sell those franchises and reap most of the rewards, unless unscrupulous franchisors put their fingers in the franchisee’s cookie jar. But the International Franchise Association and most franchisors believe it is their equity and not the franchisees. It just is very seldom that one publicly admits