The Value of Franchisee Associations
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"Twenty-five years ago, "franchisee associations" was an unpopular phrase. This phrase put fear into the minds of franchisors.A franchisee association was tantamount to unionism. It signified a breakdown of the working relationship between the franchise system and franchisees and a vote of no confidence.
The association was generally hostile to the franchise system in both word and deed.
The world is different place today. Most franchise systems would prefer that franchisees participate in the franchise system through a franchisor advisory council rather than through an independent franchisee association.
FACs are usually formed by the franchise organization and, in large measure, under the control of the franchisor.
FAC meetings are usually called at the convenience of the franchise system. The system sets the meeting agenda, and most importantly, but often overlooked, the minutes of the FAC meetings are drafted by the company, although sometimes vetted by the FAC before publication.
The franchise organization typically pays for the expenses of the FAC meeting. An FAC usually does not have independent legal counsel, and by definition, serves only as an advisor to the franchise system.
In contrast, an independent franchisee association is typically formed by franchisees, created for the benefit of franchisees, financed by franchisees and controlled by franchisees."
The reason why this is important now is that the new FDD disclosure document requires disclosure of those IndFA's that are incorporated and ask to be included in the FDD.
An Independent Franchise Association will have a different view about the business model, and it will pay for a prospect to contact the Independent Franchise Association prior to Discovery Day.
Fortunately now, if you have a reasonable interest in a franchise, you can ask for the FDD first before even going to Discovery Day.
The problem with using Discovery Day as a way of obtaining information about the Franchise system is that by the time you have got to Discovery Day you are already committed to the purchase, whether you know it or not.
By using the Independent Franchise Association's contacts you will get a broad view of the pluses and negatives of the business model.
Also, as Bob Purvin, of the AAFD, has pointed out:
"With the new disclosure requirement, Purvin said that a franchisee association's positive or negative recommendation "could prove to be crucial for the growth of a franchise system, and we expect that the simple requirement of disclosure will dramatically increase the degree of respect that an association will receive from its related franchisor."
