Franchisee Associations: They're not going away

In 1992, there were less than 30 independent associations, but by 2000, approximately, 250 franchisee associations had been formed.

Franchise Times
September 1, 2001

Franchisee Associations: They're not going away
Janet Sparks

Looking back over the past eight years, we can see significant changes in franchise systems due to one major factor: the formation of independent franchisee associations. In 1992, there were less than 30 independent associations, but by 2000, approximately, 250 franchisee associations had been formed. At one time, franchisors, in an effort to hang on to their control, turned their backs to these groups insisting that if franchisees wanted a say in corporate matter, their own “franchisee advisory council” was the avenue. After all, advisory councils are safe, consisting of equal franchisor and franchisee members and many times funded by the franchisor.

But as we watched large chains such as Burger King, KFC, 7-Eleven, Subway and Roto Rooter struggle with the difficulties of acquisitions, mergers, class action and other lawsuits, we began seeing corporate attitudes harden. As these associations started surfacing, many took the view that they would not be recognized – “It’s our way or the highway.” But franchisees rebelled and took the proverbial stance: “We’re mad as hell and we’re not going to take anymore.” As the battles raged on, both sides recognized that even winning these fights was counter-productive when the brand itself was losing the war. The true winner was the competition. There had to be a coming together, a true meeting of the minds.

As associations and corporate staff began communicating and working together in a game of give and take, things started to happen for systems. Companies began listening to their operators and delving into the real issues expressed by these franchisee groups, helping them to feel less threatened and to become more sophisticated business partners. For some associations same-store sales started escalating, and for others there was a renewed hope that their brand would be turned around for the good of the franchisees and franchisors. Franchisee associations structured themselves to become financially independent and a political force to be reckoned with. Franchisors no longer turn their backs on these groups, but embrace them, doing everything possible to create a mutually beneficial relationship. The systems that have accomplished that feat have been the recent success stories in franchising.

Three’s a crowd
But as we see franchisee associations and franchisors coming together, I have to wonder if there is still a need for large franchisee groups to belong to coalition of various franchisee associations? Some are saying no with their membership dues to the American Franchisee Association (AFA). Recently, the Burger King National Franchisee Association (NFA), and the Coalition of 7-Eleven Franchisee Associations have stopped their membership with AFA, just such coalition. Although they are insisting they are only shifting their dollars and interests more towards important industry issues, I get the impression from some insiders that paying large dues to AFA to get legislation enacted can only go on so long without results. After five years, some associations are starting to question whether their money is being well spent. Some wonder if AFA will ever be effective, especially operating in Chicago instead of Washington D.C., where dues money can be spent more efficiently.

In a recent conversation with Susan Kezios, head of AFA, she explained that associations come and go, and that losing the two was not that significant. According to her, the NFA pulled out of AFA some time ago, and although the 7-Eleven Coalition did discontinue its membership recently, Susan indicated it was a mutual agreement. At that time, she was predicting the General Accounting Office audit on the Federal Trade Commission (FTC) would be released to the public soon and expected much action on the legislative front as a result of it. Susan was the instigator of the audit, convincing three senators that the FTC is not involved enough in the “relationship” area of franchising, only in the pre-sale disclosure.

But the GAO audit was released July 31 and the results seem inconsequential, showing after a somewhat costly and lengthy investigation, there is no data supporting “…the need for a federal statute to regulate franchises and address problems that can arise after the sale…” Susan’s reaction to the GAO audit was that it was in her favor, proving her predictions. But some franchisee associations feel differently – that it was a real blow in getting a quick-fix to their problems through federal legislation.

When I mentioned my observations to Susan of how large franchisee associations had made great strides with their franchisor and seemed to be turning their relationship around, she responded that you have to look at the contracts, indicating they are still one-sided and it’s the franchisor that has the real control. Until written agreements change, she doesn’t believe it’s a true partnership.

But some franchisee associations I talked with aren’t looking for complete control over the franchisor, only tempered control. Besides, what difference does it make who has the majority of the control? Franchisors have learned through experience that they can have all the legal power in the world, but if they have unhappy franchisees, it translates to one thing – a cancer eating away at its brand. Sometimes it boils down to the fact that the majority rules and with franchisees uniting and insisting on collective bargaining as an alternative, franchisors will sooner or later learn fighting it out in lawsuits and in the press is a losing battle.

Looking at the last eight years only tells us franchisee associations will continue to grow, getting stronger and more independent. Today franchisors have a choice: To help their associations expand and assist them in getting involved in the decision-making process with the company, or continue to turn their backs on them, hoping they’ll go away.

But, franchisee associations are not going away. They are becoming the mainstay of franchising, like it or not.

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