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toolsGovernment Says AAFD Impacted New Franchise Rule
NEWPORT NEWS, Va. (Blue MauMau) - The ex-director of the Federal Trade Commission's franchise program, Steve Toporoff, credited a major change in the new franchise rule solely to the efforts of the American Association of Franchisees and Dealers. Toporoff made his comments praising the association when presented with a Total Quality Franchising award Monday night at the American Association of Franchisees and Dealers' 16th Annual Conference in Newport News, Virginia.
Said Toporoff, "All along the way in promulgating the franchise rule, the Federal Trade Commission was always concerned that the voice of franchisees be heard. You could always get franchisors to show up at hearings and to write comments but it was somewhat difficult to get franchisees, at least when we started this process in the early 1990s. But Bob Purvin, in particular, and the AAFD were always there from the very beginning [in efforts to amend the franchise rule]."
The new franchise rule begins July 1 of this year. For the first time, the FTC will require that franchisors reveal independent associations in the franchise disclosure documents presented to prospective franchise owners.
Paul Steinberg, a former Subway franchise owner and a franchise attorney based out of New York. observes, "The existence of independent association in a franchise system is a positive sign. An association allows for collaborative efforts, and in eliminating the divide-and-conquer franchisor model, the climate becomes more cooperative and less adversarial. In the long run, a franchise system that is built on collaboration has a much better chance of lasting than compared to a system that constantly fights among itself."
Toporoff, a spokesperson for the FTC, continued, "Including franchisee associations was not an issue on the FTC's radar screen. Bob and others brought to our attention how critical it is that prospective franchisees have another source of information in which they can weigh the claims that franchisors make about their system. Bob [Purvin] and the AAFD all along the way helped us in not only framing the issue, but also in improving it."
"Although a private association of franchisees and franchisors, the AAFD is widely regarded as one of the most transparent associations in franchising, where sessions are open to not only members, but to the public", observes Paul Steinberg.
Toporoff thought the future would be a better one for prospective franchisees because of the AAFD and its contributions to a more open investment environment through providing information on franchise independent associations. "I think a time will come in the next few years in which it becomes routine for franchisee associations to be disclosed," he said. "It is not just franchisee associations. It is independent franchisee associations. All of you, by supporting that effort, have really done a service to prospective franchisees in the future who I think are really going to benefit from this."
Umm,
the FTC was given an 'award' by the AAFD, so I would expect them to 'praise' the AAFD, rather than say they had nothing to do with the new regulations.
The bestowing of bozo awards is the soul of sucking up
What on earth could an award from a useless and impotent group of people mean to anyone - much less some government agency?
Most people ought to be proud that they have not received an award from the AAFD.
My mates and I give each other awards every Friday evening down at Muldoons. A free drink at Muldoons trumps any award that the AAFD could possibly bestow.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Come on Richard
I'm sure the folks at the FTC had a big ole party and memos were sent out to all of their contacts celebrating this award, because it had to be one of the greatest days in FTC history. Hell, if it i were Toporoff, I would have that award sitting out on the receptionist desk, so that everytime a visitor came in they would see it and be impressed that they received an award from the AAFD.
I fear that this photo of Bob Purvin...
I fear that this photo of Bob Purvin will be the closest thing to "Black and White" that we'll ever get from the AAFD.
There certainly hasn't been anything in terms of position and statements that could be deemed as "Black and White" coming out of this outfit.
AAFD black & white
Go onto the AAFD website and download the Fair Franchising Standards. You may disagree with them, or believe they do not go far enough... but they are a definitive position in black and white.
Question for you: which outfit would you recommend as superior to AAFD, and why? The IFA? The AFA? Someone else?
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
AAFD B&W? Maybe red all over...
Paul, I love you like a wealthy uncle, but I think someone must have dosed your Long Island Iced Tea in VA. The AAFD may have many fine qualities (mostly musical) but clarity of position is not one of them. I don't think either side of the debate could argue that the Cuppy's controversy, or the contract accreditation program, would have come about if the AAFD did not communicate with a John Kerry-like clarity and succinctness.
Black and white is saying you stand for something (like, say, franchise fairness), then standing by that principle. In this instance, the AAFD split hairs, let procedures and relationships (and dare I ask, money???) obscure the mission, let debates rage without participation from leadership, and seemingly had to convene a secret committee meetings to address basic public issues.
That there's no better alternative is hardly validation. Someone less sensitive and PC than I might say that's like being bragging about being the best looking waitress at the Gut & Butt Cafe.
If the AAFD can't resolve a very simple situation like Cuppy's, it is leaving itself vulnerable to more credible, action-oriented programs like the TGPPH .
Sean Kelly
seankelly[at]ideafarm.net
Franchise Pick
Franchisor Marketing
The CYA standard.
The only standard being applied around the Cuppy's controversy is a big cup of CYA.
To the esteemed members of the ABA hanging out on this site: this is why blood-sucking lawyer jokes never grow old.
Why is it so hard for you guys to call a spade a spade? Of course, it's probably just me as i am but a poor ignorant little businessman...
Soloman is exempted from this characterization as he seems to know what a spade is and calls them out with no bias.
Lawyers suck
Actually no lawyers did suck any blood. And these businesspeople were not "ignorant" they were lacking in common sense. In fact it was because people were willing to fork over $30K to a construction company but were unwilling to pay an attorney that they are in this boat.
As to calling the spade, since Sleep knows so much:
Mr. Webster has repeatedly asked for those who are actually affected to contact him with specifics. He has stated that if there are people who were denied financing and refused refunds, they should contact him. He has stated that if there are really 10-year payment plans that the signatories should contact him.
Mr. Solomon has advocated litigation as the solution. I am sure that as an "unbiased" party he would refer all callers to another attorney. But since he would of course be too "unbiased" to shill for himself, I have suggested that all unhappy BMMers call him and I'm sure that he will be happy to litigate vigorously.
Mr. Webster has no pecuniary interest in this matter, and is no fan of the franchisor in question. But logic and pragmatism aren't nearly as exciting as anonymous Internet bashing.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
I don't profess to "know so much"..
...and in this particular case I don't think one needs to "know so much" to understand what has occurred if one were to spend 20 minutes reading the personal anecdotes recorded on FranchisePick.com.
I guess those that were fleeced lacked the 'common sense' to understand that the 'refund' terms spelled out in their Purchase Agreement with Elite weren't actually going to be honored. I guess you're right, a lawyer should have been there to catch that:
<lawyer reviewing the PA with his client>:
Now watch when i pass my secret lawyer decoder ring over the word 'refundable', see how the 'non-' prefix appears? You're lucky I'm here to catch this or you could have been taken to the cleaners.
<client response>:
Thank you lawyer. You're my hero.
<lawyer response>:
I know.
As for Webster, he may have no pecuniary interest in the matter but as an AAFD member he certainly has a professional interest. Credit Webster for his honest work in advocating AAFD's cause -- I imagine it must be a bitch to see one shyster franchisor give a black eye to the work he and others have put in to make the AAFD a player in the franchising space. Instead of putting in this effort, he could be litigating personal injury claims, advertising his services with "Webster got me thousands!!" personal testimonials during the 11pm local station slot of Terrance & Phillip re-runs -- easy money. Webster has pursued more noble causes and hey my hats off to him for that. Let's just have the courage to call'em as we see'em when the crap hits the fan.
Escrow and Lawyers SOP
Sleep Tight writes: "I guess those that were fleeced lacked the 'common sense' to understand that the 'refund' terms spelled out in their Purchase Agreement with Elite weren't actually going to be honored. "
No, it is a matter of both trusting and verifying. Any decent transactional lawyer would have put the refundable deposit into his or her trust account - which I understand is now being done with Cuppy's new franchisees.
If the conditions precedent were not met, such as bank financing becoming unavailable, then the transactional lawyer would return the money to his or her client.
This is a standard operating procedure - one used all the time to verify that the intent expressed in the contract will have teeth.
Lawyers cost money for the same reason insurance costs money - bad things happen, even when both parties mean well.
Michael Webster PhD LLB
Franchise News
The trouble with Webster is that...
he really cares about professional quality, and he is capable of being altruistic. He has a brain and a heart, and he sometimes puts his heart out there in front of his brain - for the benefit of the team.
Not many people are like that.
I think he is riding a dead horse in the AAFD instance. But I have ridden a few dead ones myself over the years.
Some things just don't lend themselves to "standards". Some situations are not salvageable. Some poeple are not redeemable. Some franchise organiazations are simply evil masquerading as a business opportunity.
Treating evil as though it could turn itself around and become good is an exercise in pearls casting. Swine have only one purpose - to be slaughtered.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Steinberg is wrong about Solomon
Solomon never shrinks from recommending that people hire him to represent them. Solomon believes that he is better at getting in a bad franchisor's face than almost - yes almost - anyone else.
Thanks for protraying me as a shrinking violet. I know you meant well.
But if you want/need a stone killer, Solomon is your huckleberry.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Texas is Odd
I didn't even know that stones were alive in Texas. My goodness, will wonders never cease.
Michael Webster PhD LLB
Franchise News
I actually prefer it
when Solomon refers to himself in the third person. It makes me want to hire him for all my huckleberry needs.
AAFD's Decision
Sean, you have got to start addressing the material issues:
1. Were the settlement agreements and refunds a better solution than litigation?
2. If so, would they have arisen if the AAFD had not been involved?
Those are the material issues - not whether Doug Hibbing is a good song and dance man.
You have been instrumental in keeping this issue alive - but at some point, you have to take a stand on the material issues.
That point would be now.
Michael Webster PhD LLB
Franchise News
Easy for you to say
Michael,
Yes Sean has been instrumental in keeping this issue alive, do you know why? Because some people care about the well being of others. You can try to make him look wrong or ask how can we fix it now? Now seems too late- have you seen all the postings from unhappy franchisees? There are tons, and there are more out there that just do not have time to sit and put any comments on wbsites about this company.
And to answer your question above, if Cuppy's had all the money of a franchisee, what money does the franchisee have to hire a lawyer for litigation? They are screwed....... So yes to have an agreement and refund would be best, but not in payments over 10 years- insane!
If you are so "Pro Cuppy's" what do you have to say about all the stores that have closed in the United States? I have been researching a long time, and there are over 6 stores closed that never made it past 5 months of being open.
I really do not know much about you, but if you like to set people up for failure and take all the money that they have saved for years.. Keep routing for Cuppy's BUT my suggestion to you- WAKE UP AND SMELL THE COFFEE!
10 Year Payments
If you have evidence of a settlement which paid out over 10 years, then please forward to either the AAFD or myself.
Michael Webster PhD LLB
Franchise News
"We suck less than everyone else"
"We suck less than everyone else." is rarely an attractive marketing slogan nor is it a sustainable defense for a standards organization.
Life sucks
OK, now I get it. You don't have any alternatives because every franchise organization sucks. Life sucks. Cry me a river.
Lead, Follow, or get out of the way.
So far we have (mostly anonymous) whining from people who may or may not have any involvement with the particular zor. We have Richard Solomon saying "lets litigate against [Cuppys? Medina? Elite? Morgan? FranSynergy? SantaClaus?]" and Sean Kelly saying "lets keep bashing the AAFD" but offering no actual solution.
Bottom line: after all this whining and some productive discussion we are left with:
As discussed previously, there are significant problems which Dale Nabors is facing over the next year. But at the present time, there are 12 complaints referred to AAFD. Given the numerosity of the "Guest" postings, it is reasonable to infer that most if not all of the "Guests" are not even the aggrieved parties.
As to the cost of litigation, if indeed there are hordes of victims out there and this is such a slam-dunk legal case, then by all means have everyone call Solomon and work out a retainer agreement.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Disclosure of Franchisee Associations, Thank You!
The FTC Amended Franchise Rule increases disclosure in a some areas and stops short in others.
But, one thing is for sure the requirement to disclose franchisee associations (if requested) in the FDD will have a positive impact on franchising.
This requirement should force franchisors to acknowledge and respect franchisee assocations or potentially suffer the consequences of negative validations by the franchisee associations to prospective franchisees.
I commend the AAFD for successfully bringing the value and importance of this disclosure to the attention of the FTC. I also commend the FTC for requiring franchisors to disclose the existance of franchisee associations in the FDD.
Strong and independent franchisee associations are good for franchising!
Jim Coen
877-469-3002
Blog: Lets Talk Franchising
Jim Coen is the Executive Director of the New England Franchise Association
No wonder the new rule is total bullshit!
The ony change of note in the new rule is the issue of recognition of franchisee associations.
Recognition does not equal effectiveness. Recognition, like everything else about the AAFD, is just window dressing.
The absence of material improvement in the quality of disclosed information shows that it was the IFA, not the AAFD, that influenced the new rule.
--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
There is a more critical change than 'associations', Rich
Inclusion of a broker (sales agent) or their background is not required in the FDD. A seller's identity is only required to be 'listed' as such on the receipt page following disclosure. There is far more room today for a fraud to work on a prospect and further diminish due diligence.
Nick Bibby is a franchise consultant and principal of the Bibby Group.
Adding to Nick's point...
Why I agree that the new Franchising Rule and FDD guidelines are a step in the right direction, the overall oversight and “regulation” of industry practices is still a question mark for me.
I’d be interested to learn from the pundits out there about the ongoing plan for revisiting the Rule and conducting real-world analysis and revision of the Rule by the FTC and NASAA.
Follow the money…Similar to when any changes in the tax code or general investment rules takes place, you just know that there are big fees being paid by the Zor side of the equation to smart attorneys in order locate loopholes and institutionalize practices which “legally” increase Zor leverage versus the Zee. It seems that ‘walking between the raindrops’ is our new national pastime.
As Nick noted, there are already question marks surrounding several items and several registration states have adopted their own rules covering recent technology related issues...issues not covered in the FTC/NASAA UFDD.
IMHO, a 20 year frequency revision cycle is not adequate. I would hope that the FTC and NASAA have planned for hearings/review/report window in the range of 12-18 months post implementation of the 7/08 UFDD Rule. Ongoing, an effectiveness review/maintenance/adjustment process every 18-24 months would be a good thing in terms of keeping on top of any unforeseen abuses and the closing of any loopholes. One would think that any representative body that truly believes in ethical behavior of their members, fairness and the rule of law would promote and support such a concept.
There is a big problem
with zees getting involved. Many are running their business with no money coming in. How can they afford to do anything? They have put all they have into their so called business and are working for free.
The one's that are up and going should do their part in contributing to associations. Are there assoications in the west coast? I have only heard of meetings in the east coast.
This dsyfunctional system of franchising will not be resolved until there is fair business practices established. The zee will, especially those they use for the build out and equipment will never be a part of any association because they will be out of business eventually and the new owner may or may not make it. Is it any wonder zees can't do anything. They would like to. I know they would. I have talked to many current zees and former zees. Many zors do not have the best interest of their zees. Would being part of an association help? I doubt it.