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Bob Purvin: "Franchisee Associations Are Growing But We Should Be Seeing More"
SAN DIEGO (Blue MauMau) - Mr. Robert Purvin, a franchise law expert and chair of the American Association of Franchisees and Dealers, discusses his disappointment over the last decade on the lack of progress franchisees have made in protecting their rights.
Purvin is a believer in the franchise model. “When it works right, the franchise model is free enterprise at its best,” he declares. But having seen many horror stories, he tempers that with a word of caution. “Investors ignore warning signs, being bedazzled by the brands they like,” he adds. “They want in, not realizing or caring that they are buying into a contract that makes them largely an indentured servant. Franchise owners need to be mindful that the contract is what controls their franchise ownership.”
Having just published his updated and re-released book, Franchise Fraud, which is now available in paperback as well as in an online electronic edition, Mr. Purvin discusses with the Blue MauMau community how franchise owners work hard but tend to ignore an important negative; namely, a legal deck of cards that is increasingly stacked against them until it is too late.
Blue MauMau: In your book, you state, “the AAFD has only been able to award its Fair Franchising Seal to 18 brands has been a disappointment.” You also mention that franchise owners seem disinterested in providing even as little as $5 per month to defend their own interests through independent franchise associations. Why the disinterest? And if this is true is there much of a future in associations defending franchise owner issues??
Purvin: Yes, the slow growth of franchisee associations has been a disappointment to me.
AAFD seems to be the survivor of a number of franchisee associations that started years ago. We have been growing over the last several years. But there are three things that continue to be problems : apathy among franchisees, the independent nature of franchise owners, and the fear of repercussions from franchisors.
Additionally, most franchisees have no interest in an adversarial relationship. Franchisees often disdain from joining an association out of fear that the association will be adversarial.
The AAFD tries hard to keep people on a positive trail. Usually the franchisees we represent are passionate about the success of their brands. At the end of the day, if franchisees and franchisors work together, they can succeed (and exceed) their goals.
BMM: You say those who are on their way out of franchising are the ones most angry and motivated to get involved in fair franchise action. But by then it is largely too late to do much. An egregious franchise agreement has already been signed. Besides, this group will shortly move on with their lives outside of franchising.
Purvin: I’ve seen an increasing number of franchisees flee their systems and attempt a legal recover for the contractual breaches and false promises made by their former franchisors. It is truly unfortunate so much effort and expense is invested in ‘getting out’ instead of making franchising worth ‘staying in’.
When I go out to groups, my first challenge is to change the paradigm of thinking. Franchise owner groups tend to come to me in an angry state of mind. Usually there is something wrong in their system and they want to fight back. My goal is to get them to not light the torches and storm the castle but to reach out to the franchisor in the way that the franchisor wants to deal with that group.
At the end of the day, we want to build a great marriage, not a warring brand.
BMM: So how do you shift the mind set of mistreated franchisees from anger to constructive engagement with the franchisor?
Purvin: When I meet with a group, I ask them how they run their business. I usually ask the question, "When prospective customers come knocking, do they demand the customer do business with them and if the customer does not, does the franchise owner threaten to sue the customer?" The obvious message is that business operators will not get new business by threatening or coercing customers. Then I’ll ask, "if a franchise owner would never try to entice customers through threats and coercion, then why would this be a successful strategy to entice a franchisor, the guy that you have already signed your life away to?"
The message behind the book The Franchise Fraud is that the franchising industry often does not deliver on the promises of franchising. But the marketplace can deliver quality franchising by franchisees organizing to warn prospective franchisees of current deficiencies, by negotiating fair and balanced franchise agreements and by developing collaborative relationships. The court rooms and government regulations have been poor tools of reform. It is collective bargaining that is the best hope of leveling the playing field in franchising in a manner that serves the needs of both franchisors and franchisees.
BMM: Where do you think the future is with independent franchisee associations?
Purvin: There has been a decided growth and recognition of independent franchisee associations, perhaps three times as many as existed when I wrote Franchise Fraud some 14 years ago.
Although franchisee associations are growing, we should be seeing more. The AAFD has identified about 120 independent franchisee associations. This is only 4% of the estimated 3000 franchise systems in the United States. Unfortunately, the vast majority of franchise systems continue to perpetuate one-sided adhesive agreements that deny meaningful ownership rights, supplier sourcing, purchasing rights, and the right to set their own retail prices.
The winds of change are blowing in the direction of a new age of franchising - an age that places the ideals of a mutually fair franchise relationship on a marketplace pedestal. What is needed is for franchise owners to support their association to defend their vested interests. Because if a franchise owner does not [protect their own interest], no one will.
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Articles in this series:
- What Chain Has the Fairest Franchise Agreement? Worst?
- "The Nine Best Franchises," a Robert Purvin interview
- Blue MauMau's book review: The Franchise Fraud: How to Protect Yourself Before and After You Invest
- Podcast (28 minutes). Listen to an Interview with Bob Purvin, Chair of the American Association of Franchisees and Dealers, on Protecting Yourself Against Franchise Fraud
Purvin in Nader’s No Contest
Ralph Nader is a current presidential contender and was named one of the 100 most influential Americans in American history by The Atlantic. Only a handful of these are currently living. Nader, an attorney by training himself (Harvard Law School, class of 1958), is co-author, along with Wesley J. Smith, of No Contest: Corporate Lawyers and the Perversion of Justice in America.
The one-sided agreements going on in franchising are just part of the bigger picture of what is going on in corporations in general. In the book’s introduction we read that the American Bar Association Model Rules of Professional Conduct states, “As a public citizen, a lawyer should seek improvement of the law, the administration of justice,” (page xix, very shortened version). But, write the authors, “How many lawyers think of these words even once a year? The gap between the profession’s idealism and reality is vast and replete with difficult contradictions.”
On pages 364-366, franchise agreements are covered. At the top of page 366 we read, “All this was too much for one prominent attorney for franchisors, Robert L. Purvin, Jr., who used to enjoy ‘being able to pull out all the stops in the preparation of a lawsuit against franchisee defendants unable to afford even an “inadequate defense.” ‘ His growing concern over the ‘inequity of the franchise relationship’ led him to tell a Wall Street Journal reporter, ‘I had never written or read a franchise agreement I could recommend a franchisee to sign.’ (Purvin now represents as an attorney—and crusades as a lawyer for—franchisees who are seeking a fairer, more balanced franchising industry.)”
If you’re interested in the one-sided power of corporations and how and why corporate attorneys have assisted them over the years to more and more power while ignoring their own moral principles and the ethics that, as far as I know, the ABA still professes, this book is highly recommended. (The ABA’s website has “Defending Liberty, Pursuing Justice” right under the ABA name, and states that Goal V of their 11 goals is, “To achieve the highest standards of professionalism, competence and ethical conduct.”) The book is a real eye-opener, and as a law student wrote on Amazon.com, “This is not the kind of stuff they teach you in law school!”
I’ve heard Ralph Nader in person. He is dedicated to improving the lot of the common citizen, does his homework and knows what he’s talking about—which makes him very convincing. Apparently his character is flawless, at least when compared with the rest of us typical mortals. General Motors back in the ‘60s sent private detectives to get the goods on him, in particular looking for sexual scandal, and came up with nothing. Instead, their efforts boomeranged and they were the ones who were disgraced, with the company issuing a public apology to Nader and paying him $284,000 net settlement after he brought suit against them for invasion of privacy.
Here’s what one patriot said about corporations:
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." —Thomas Jefferson
The “private banks” mentioned above is a whole ‘nother can of worms, but their control of the currency came on December 23, 1913 with the passage of the Federal Reserve Act, which was passed in the dead of night at a time when the people were distracted by the holiday season. The dead of night is a favorite time for Congress to pass laws whose close inspection is unwanted.
Franchisees Need The RIGHT To Organize
Until franchisees get the same legal right as workers to organize there will be many chains with no strong franchisee association to fight the injustices and bullying tactics of rogue franchisors.
For example, there have been countless articles regarding Quiznos' efforts to kill any franchisee dissent - those efforts going as far as pushing one poor franchisee, Bob Baber, to suicide. The illegal efforts to decertify and close the stores of the TSFA leadership a couple of years back has also had a profound and long-term negative effect on efforts to organize. The result is a weak, ineffective franchisee association even with a majority of franchisees on the verge of bankruptcy.
Most franchisees don't have the monetary muscle to stand-up for themselves. Getting government rules in place would level the playing field and give organizations like the TSFA the ability to organize franchisees free of harassment.
Government Made Labor Unions Work
You need to check your history. Labor unions didn't gain a major foot-hold in this country until the government stepped in and stopped alot of the intimidating practices of greedy, corrupt, corporate barons. Franchisees are in the same position as those workers - except instead of scabs and bully boys these greedy corporate execs use their high powered lawyers and paid for judges to break men and women simply looking for a square deal. Bob Baber's is a good example of how far some are willing to go to keep this system in place.
Government Did Squat
Guest writes: "Labor unions didn't gain a major foot-hold in this country until the government stepped in and stopped alot of the intimidating practices of greedy, corrupt, corporate barons. "
Do you understand anything about your history?
Labour fought, they fought in the streets, they fought with general strikes, they just plain fought. Physical, nasty and brutal fights.
Labour supporters died. Dead. Killed by Government supporters.
Dead.
Freaking franchisees won't even pay their franchisee associations to lobby.
Michael Webster PhD LLB
Franchise News
History of Labour Unions
Guest writes: "Until franchisees get the same legal right as workers to organize there will be many chains with no strong franchisee association to fight the injustices and bullying tactics of rogue franchisors"
Uh, try reading some American history on the labour movement. Unionists died fighting for collective negotiation rights. Not one person, but thousands.
You want to join the fight, or continue to be whiner?
Michael Webster PhD LLB
Franchise News
Franchisees already have the right to organnize themselves
into an association. They can't become a labor union because they don't qualify to be a labor union.
What keeps franchisees from having a strong say about their destiny through franchisee associations is the lack of cojones. They won't put up and they won't stand up.
Those who do put up and stand up do better than those who don't.
See www.FranchiseeAssociationManagement.com --
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
re: Franchisees Need The RIGHT To Organize
Some state statutes explicitly grant or acknowledge this right.