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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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