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Robert Purvin, founder and chairman of the American Association of Franchisees and Dealers, spoke at length with this journal. Purvin is busy nowadays preparing the AAFD, a non-profit trade association that represents the rights and interests of franchisees, for a franchisee leadership summit in Palm Springs. The conference will run from April 30 to May 3 and commemorates AAFD's 25th anniversary.
Besides founding the franchisee association nearly 25 years ago and organizing many franchisees of various brands into their own franchisee associations, Purvin is also the author of a book that is essential reading to any would-be franchise buyer and franchisee–The Franchise Fraud: How to Protect Yourself before and after You Invest. For decades the attorney has been a tireless advocate for franchisees and their rights.
Purvin speaks frankly about why franchisee associations are necessary and how franchise owners must push their king to sign the equivalent of a Magna Carta to protect their franchise rights.
SNIEGOWSKI: Congratulations on the upcoming 25th anniversary in May of your alliance of independent franchisee associations, the AAFD.
Some franchisees whom I have spoken with have felt that independent franchisee associations were useless. After all, if they find themselves wanting to push the franchisor to change, they are likely to think of their franchise advisory council, and not independent associations. If they get in trouble with their franchisor, that's why they have mouths to provide advice or money to hire attorneys. Why are independent franchisee associations needed for franchise owners?
PURVIN: Let me start out by saying that all franchisee associations are not created equal. There are associations worthy of emulation and there are others that are not. Too many franchise associations are born out of crisis. These groups are mad as hell and don't want to take it anymore. They want to light the torches and storm the castle. That is not a recipe for successful long-term associations, although it may be a recipe to resolve an immediate wrong.
Most associations are born out of an imminent crisis. The crisis is a challenge to the owners to come together in order to have a chance of winning the battle ahead of them with their franchisor. Franchisees will be successful only if they have great franchisee leadership at the outset. They need to recognize that their long-term best interests are in protecting both the brand and their rights within that brand in order to both represent and benefit from their involvement with the brand. There are associations and there are franchisee advisory councils. There are associations that would have a death wish for the company. And there are associations that have a dream for better things. And then there is the ongoing struggle of the relationship between the franchisor and franchisees. In the past, there has been an edict floating around the International Franchise Association [an association for franchisors] that tells franchisors that they need to stop franchisees from organizing their own associations, or at least to get in control of it.
There used to be something at the IFA called the standards of behavior, or something like that. It recognized the right of franchisees to have points of discussion. There is a manual, I know it is out there but I haven't seen it, telling a franchisor how to create a franchisee advisory council. When a franchisor creates a franchisee advisory council it gets to control the franchisee agenda.
A franchisee advisory council is rarely organized in a way that aligns with the true interests of the franchisees, even if the franchisee is an elected representative. You do not ever go after your constituents and say, "What issues do you have?" The advisory council leader shows up for a meeting and accepts the franchisor wining and dining him or her. The advisory member receives the reports that the franchisor gives and the things the franchisor has planned for the franchisees next year. It is discussed. And then the franchisee representative of an advisory council goes back to his or her office and issues a public statement that franchisees endorse all of the franchisor's initiatives.
In contrast, an independent association is in business to listen to franchisees. It has the autonomy to speak up and negotiate on behalf of franchisees. The problem is that franchisees who unquestionably follow are often sought after by franchisors. Franchisors further cultivate the relationship to where the franchisee thinks he has to be a lieutenant, even when it comes to his own business. In this case the franchisee feels that he has paid good money for the franchisor to lead. He or she steps back and plays the role of a passive follower.
SNIEGOWSKI: I see. You are saying that a passive franchisee role and the lack of checks and balances is asking for trouble from the franchisor.
PURVIN: Or worse. But the problem is psychologically many of the franchisees who say they don't need an association are folks who have accepted that they need a strongman to lead the brand. "This is the franchising company that I have bought into and I expect that leadership to drive the brand," they rationalize. They are sort of loyal regardless of what the franchisor does.
We run into a lot of folks that are like that in every franchise system that I have helped organize into an association. We follow a 60-20-20 rule in which 20 percent of the franchisees will immediately understand we are the voice of franchisees. And on the other side, 20 percent of the system say they will be totally and wholeheartedly loyal to the franchisor and will oppose any association who says it wants to act on my behalf as a franchisee that isn't from the franchisor. Those tend to be people who are strongly anti-labor union and see franchisees as labor.
SNIEGOWSKI: So your challenge is to snap franchisees out of their trance. That is ironic considering that franchisees are capitalists, and capitalists can be quite effective in working with other owners to protect their property and business. Just think of baseball or football franchise owners. These billionaire owners are very good at giving their franchisor directions and protecting their self-interests, their businesses.
PURVIN: We need to remember that the history of trade associations date back to the 12th Century. There have been vendor guilds and company guilds, whose members came together to defend their rights as merchants. On the other side there are also labor unions. Some business owners have a tough time distinguishing between the two when it comes to their own self-interest and having their franchisor follow and enforce their collective will.
Guilds are people of like mind. From the AAFD's perspective, an association is created to help drive a great brand. At the end of the day all of the chapters that the AAFD has created have been dedicated to great franchising. They have not been dedicated to taking down their franchisor. They have been dedicated to defending franchisee rights to represent the brand, to have equity in their businesses, which is a simple phrase that refers to much more – for example, their right of renewal, their right to compete, their right to choose suppliers and to have profits.
That is the bottom line. When an association comes together for that purpose and is not bastardized or co-opted by the franchisor or a third-party agenda, that association proves to be very effective.
SNIEGOWSKI: Give me a few concrete examples of what you have seen associations accomplish. What good have they specifically done for their franchisees?
PURVIN: There are many examples, some big–Burger King, KFC, Subway and Dairy Queen. Most associations come together at the outset over the relationship issue about negotiating their franchise contracts to improve their rights. The first for AAFD many years ago was Taco John's. Taco Time, Meineke, Super Cuts were other associations in which that chapter renegotiated their entire agreement.
The Griswold chapter of franchisees has just come out of a 16-month negotiation with their franchisor where they have totally renegotiated their contract and have what I think of as the gold standard of franchise agreements. Our BNI (Business Network International, the franchisor of Griswold Home Care businesses) chapter of franchisees has just announced a renegotiated agreement that they are happy about.
These successful negotiations have all been products of franchisee associations coming together to represent the breadth of franchisees with the understanding on the franchisor side that the franchisees, acting together, have the wherewithal to stand up for their rights. In some of these instances, lawsuits were filed, such as with Meineke and BNI. Those franchisors were forced to come to the table or see their brand destroyed.
With other companies wiser minds prevailed. Lawsuits were not needed.
The organizations that have been wildly successful in the long term become very involved with the protection of a franchisee's supplier rights both in developing supplier relationships, having rights to choose suppliers, and becoming involved in negotiating deals with suppliers. Group purchasing is a reality that benefits the whole system.
And the third thing [besides the previously mentioned 1) group negotiations and 2) supplier rights] that successful franchise associations have happens in the area of sharing best practices – mentoring of franchisees is a way that franchisors have typically failed. Recently franchisors have particularly been unwilling to mentor franchisees because they feel the threat of the law that might classify them as a joint employer with their franchisees' employees.
Those are the three areas that franchisees have proven to be the most supportive. If you look at the most successful franchisee associations–if you look at the top of the chart being KFC, Burger King, Subway, Meineke, Midas–all of those concepts are built around strong fine guilds in the form of cooperatives that are owned by franchisees. It is a huge area in which associations have been singularly productive over the last 40 years.
SNIEGOWSKI: What you are saying reminds me of the Magna Carta, and the lords and barons who went up to King John, much like franchisees, demanding rights as property owners but also a model of checks on governance that was good for all.
PURVIN: The one correction I would make is that these lords and barons [of King John's day] were not almost like franchisees, they were franchisees. They were franchisees of the King. They had been granted rights. Franchising is the granting of a right by the King, to operate their estates. The first franchisee revolt in recorded history is the Magna Carta. The second famous franchise revolt happened in 1776 when the thirteen franchises of the King revolted to create the United States of America. The colonies were commercial franchises. The group of lords and barons who forced the king's signing of the Magna Carta was not like a franchise association, it was a franchisee association. By the way that is in chapter two of my book The Franchise Fraud, How to Protect Yourself before and after You Invest.
The Magna Carta and its role in franchise history is one of the things that I wrote about. Franchising is a feudalistic system in which a person who has a right to an asset grants a license for others to operate the asset. That granting of rights is franchising. The nobles in the Magna Carta said to the king, you are abusing your franchise rights with us. You are taxing us at will. We will not pay these royal tithes to you without advantages, without certain protections.
What those lords and barons collectively accomplished centuries ago is actually what every franchisee association is in business to do.
This article is Part 1 of a series.