The lesser of two evils

Although the IFA has had its franchisee members in its march against this legislation, most legislators still see the battle as “David against Goliath.” IFA has not taken any kind of active role of enforcement in its association – they have been the educators, the promoters.

Franchise Times
February 1, 2000

The lesser of two evils
Janet Sparks

As we enter year 2000, franchising has a black cloud over its head – H.R. 3308, “Small Business Franchise Act of 1999.” The bill represents several things. First and foremost is the tenacity of Susan Kezios of the American Franchisee Association. Susan used to be a simple irritation to franchisors. She was in every negative franchise news article bashing franchisors. The franchiser community couldn’t wait for her funds to run out so she could go on to some other cause. But, as we all know, that didn’t happen. She has survived. No longer is she just a bother to many franchise systems, she has now become a serious threat to the heart and soul of franchising.

But what’s the driving force behind her? Franchisors may find part of the answer in the recent Asian American Hotel Owners Association convention.

AAHOA is not only a founding member of AFA, it is evidently a big resource to her association. Through the professionalism of the convention, you could detect a certain amount of activism throughout the event, in pushing for legislation. After 10 years of growing (33 percent last year) and maturing, AAHOA is no longer accepting hotel franchisors’ excuses for one-sided contracts. And with Cendant’s sudden reappearance, they must know drawing a line in the sand with their 12 Points platform has worked.

The second thing Bill 3308 represents is that the International Franchise Association has one big problem in its lobbying efforts: they constantly seem to underestimate the seriousness of the legislation. In spite of their own dutiful efforts to knock this bill out of the franchise arena, they seem to have a smugness that legislators don’t like, which incites feelings in favor of disgruntled franchisees. Although the IFA has had its franchisee members in its march against this legislation, most legislators still see the battle as “David against Goliath.”

IFA has not taken any kind of active role of enforcement in its association – they have been the educators, the promoters. This has prompted the National Franchise Council to form. All of the largest hotel franchisors and a few other prominent franchise systems make up this group, and hope to show that they can self-regulate by partnering with the Federal Trade Commission to re-train franchisors on minor violations.

Some NFC members had been instrumental in defeating the Iowa Bill. But we now have to ask the question, will they be part of the solution in defeating federal legislation or will they be considered part of the problem? Does their “closed membership” to only the largest, most righteous franchisors also suggest an arrogance that legislators find threatening to small business? I can’t help but feel there is a definite correlation between the membership of AFA and NFC, both seem to attract large associations or companies.

The Coble/Conyers Bill will try to rectify franchisors’ sins of the past and be the salvation of franchisees by leveling the playing field. But what does the government really know about franchising? This past year they have taken a crash course on the subject and decided the knew enough to introduce this bill. They’ve listened to the heartbreaking stories and heard testimony of abuses. They’ve concluded the government needs to be in the middle of the relationship.

But in reality, it takes decades to understand the complexities of franchising. Competition is the real spirit of franchising and it is brutal. In the words of Ray Kroc of McDonald’s, “When you see your competitor drowning, what should you do? Shove the hose down his throat and turn the water on full blast.”

Whether franchisees want to admit it, they know that’s the name of the franchising game – for franchisors and franchisees to strive together to knock out the competition. Divided they will both lose.

The great thing about franchising is its tremendous diversity – the many different industries, established and emerging; the different levels of operators, mature and inexperienced. Legislation may prove to be good for some, but for most, it will harm the success they’ve known and enjoyed. The only way many franchisees have gotten where they are today is through their hard work and persistence, following the franchisor’s innovative business scheme, and accepting responsibility for their own actions. Some have fought battles with abusive franchisors or have experienced the difficulties of mergers or acquisitions, but even many of those are not looking for a way out. Something keeps them in the system.

One constant but subtle theme throughout the AAHOA convention was the issue of H.R. 3308. But in my estimation there may be a stronger theme that could emerge with a little help from franchisors. What is it? True self-regulation. AAHOA members are savvy business people who are reasonable, and some have stated they hate having big government in their business.

Franchisors may be faced with a new choice in the years ahead – legislation or self-regulation. For them it may all come down to choosing which is the lesser of two evils.

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