IFA's Nearly Year-Long Effort to Ease Credit
WASHINGTON – Last week Matt Shay, the CEO of the International Franchise Association, and several franchise owner-operators attended a meeting with President Barack Obama, the culmination of months of efforts.
“We thank President Obama for his actions and we thank the thousands of IFA members who made their voices heard this year through letters, meetings and calls with policy makers,” Shay said. “Making SBA loan programs work better for entrepreneurs seeking capital to open, acquire or expand a business will allow the economy to recover faster and provide the necessary bridge to a functioning commercial lending market once the recovery is complete.”
In fact, the IFA as early as December of last year contacted the previous administration’s Treasury Secretary, Hank Paulson, requesting that he use Troubled Assets Relief Program (TARP) funds to improve lending to franchise owners. Unfortunately, outgoing Secretary Paulson had bigger things on his mind. Now it is the new Administration that is taking action, announcing plans to shift some of Wall Street’s bailout funds to jump-start SBA-backed lending to small businesses.
Alisa Harrison, vice president of communications and marketing for the International Franchise Association, observes, “IFA has been working on credit and economic recovery issues since last Fall.” On the same day that President Obama featured franchisees and raised the caps on SBA-backed loans to stimulate small business lending among banks, Ms. Harrison wrote Blue MauMau that the event was the culmination of “letters, meetings, testimony, advertisements and media interviews. Beating that drum is the value of a trade association that represents ALL facets of the industry.”
The IFA consists of over a thousand paying franchisor members who ask the association to lobby on their behalf. The franchisees of its paying members are allowed to participate in IFA activities free of charge.
In January of this year, the IFA introduced a recovery plan that asked the SBA to increase the SBA 7(a) loan program to $5 million, an initiative that the President announced last week. It also urged the SBA to sharply reduce SBA lender fees to incentivize banks to make loans, and it wants the SBA to relax bank audit standards so that lenders will not fear losing their SBA loan guarantees once the loan is issued.
The White House seems to be listening.
Addressing small business issues last week, the President brought up the story of a Dunkin’ Donut franchisee struggling to access capital to expand his business. He announced that he would like to shift some of the TARP funds over to community banks in order to spur lending to small businesses, which has slowed to a trickle. In order for that to happen, the President is requesting that Congress increase Small Business Administration 7(a) and 504 loans from the current cap of $2 million to $5 million. The loans are used by small business owners to typically buy equipment, land and buildings.
The announcements by the President read as if they were coming from the IFA’s playbook. It reflects considerable effort by the lobbying group.
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Dec 23, 2008: The IFA urges Treasury Secretary Hank Paulson to use the Troubled Assets Relief Program to improve small business loans
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Jan 14, 2009: IFA urges Congress to take steps to increase small business access to credit
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Jan 22, 2009: IFA attends the U.S. Conference of Mayors and pitches the importance of franchising to the economic development of their municipalities
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Jan 28, 2009: IFA sends a letter to the SBA on the need to not cap lenders ability to finance “goodwill” at $250,000
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Jun 10, 2009: A leader of the Great American Cookie Independent Franchisee Association and a franchisee, Lawrence “Doc” Cohen testifies before the U.S. House of Representatives Small Business Committee that the SBA needed to improve its small business financing programs
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Jul 16, 2009: Matt Shay appears on Fox Business News (video stream) to explain problems to small businesses and franchise owner-operators with CIT skirting bankruptcy
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Jul 23, 2009: IFA leaders meet with the Treasury, Federal Bank and Small Business Administration
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Sep 10, 2009: IFA advertises on the impact of the credit crunch. The ad was placed just prior to its Public Affairs Conference
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Sep 30, 2009: Dina Dwyer Owens, CEO of franchising firm The Dwyer Group and this year’s chairwoman of the IFA, gives testimony (see video) to the U.S. House of Representatives Small Business Committee asking for the perpetual extension of expiring tax reductions such as the death tax. She also asked for a tax credit for veterans buying franchises
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Oct 14, 2009: IFA’s CEO and president Matt Shay gives testimony to the U.S. House of Representatives Small Business Committee on the need to free up capital for franchising systems
Despite such efforts, Harrison warns that the work is not yet done. “We still have a way to go to get the legislation through Congress,” she says.
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Related Reading:
- White House Fact Sheet (pdf), the Administration's plan to help small businesses access credit and create jobs
- Obama Asks for SBA Loan Expansion, Franchisees Agree
- Lenders and Franchisors Work Together to Keep Franchise Buyers from Knowing Bogus Earnings Projections for SBA
- Franchise topic:
- Enter Your Own Tag:
WASHINGTON, Oct. 27, 2009—The International Franchise Association lent support today to H.R. 3854 introduced by Rep. Kurt Schrader (R-OR) that would make important improvements to small business programs to increase access to credit for franchise businesses.
“IFA supports H.R. 3854, the Small Business Investment and Financing Act,” IFA Vice President of Government Relations David French said in a letter House Small Business Committee Chair Nydia Velázquez (NY) and Ranking Member Sam Graves (MO). “This legislation will go a long way towards updating and improving Small Business Administration loan programs so that more prospective franchise business owners can obtain the necessary capital to help lead our economy on a road to recovery.”
French said that H.R. 3854 streamlines the bureaucratic process of obtaining an SBA backed loan, provides lenders greater certainty of the guarantee, makes the Secondary Market Lending Authority permanent and prohibits alternative approval standards for loans used to finance goodwill. The legislation will also increase the size of business stabilization loans to $50,000, which will assist many existing small firms who are struggling to make payroll, pay off debt or finance inventory.
In addition, the introduction of H.R. 3854 comes less than a week after President Obama and SBA Administrator Karen Mills expressed support for changes in small business programs, including an increase in the SBA loan limit from $2 million to $5 million. While H.R. 3854 proposed to increase the maximum loan to $3 million, IFA urged the committee to consider further increasing the limits as proposed by the Obama Administration.
“The IFA strongly urges Congress to consider further increasing the loan limit in this legislation from $3 million to $5 million. There are over 400 different franchise brands in the United States that have an average initial investment requirement of $750,000 to $2 million per unit. These franchised small businesses reach the SBA’s current loan limit of $2 million by the time they want to build the second or third store,” French said. “By increasing the loan limit, at an annual growth rate of five percent, these businesses could create 450,000 to 650,000 new direct and indirect jobs within the next 12 to 18 months.”
French also told the committee that IFA is concerned that while H.R. 3854 increases the maximum loan amount, it does not increase the amount of the guarantee.
“The American Recovery and Reinvestment Act temporarily increased the loan guarantee rate to 90 percent,” French said. “The IFA recommends that until the economy recovers, the 90 percent guarantee rate established by the ARRA be extended commensurate with the new maximum loan limits in H.R. 3854.”
For a copy of the letter the House Small Business Committee click here.
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Press Release
". . .H.R. 3854 streamlines the bureaucratic process of obtaining an SBA backed loan, provides lenders greater certainty of the guarantee. . ."
The exact wording of the bill (although in this administration it appears they don't need to know what the bill says in order to vote for it) needs to be analyzed before we can conclusively establish in what way the "greater certainty" is established. If, however, they mean that the projections shall be ignored as a means to establish fraud then potential franchisees are in for some serious scamming. The IFA has zero concern for franchisees (no news there). What is disconcerting is their willingness (perhaps collusion) to accept scam franchisors to not only exist but to flourish.
The IFA's request to relax auditing standards to lenders of SBA-backed loans has me very concerned. Investigative news pieces have shown that there are franchisors acting in conjunction with banks to give the Small Business Administration bogus financial projections so that they can secure the SBA's guarantee on the loans. Franchisors and lenders seem to already know what the SBA wants to see to qualify a loan. They fill in the blanks to meet those financial requirements.
The end result is that those who should not qualify to buy a franchise have been receiving loans.
Now the IFA and its franchisors want to relax the threat of an audit that is needed to catch a bad practice that may well be widespread.
That is not good.
It is not good for franchisees because they'll end up losing their house, used as collateral, on a loan that they should not have received. It isn't good for franchisors because their bubble of franchise buyers, who aren't really qualified to invest, will one day pop. It is a house of cards that could easily bring down all.
I ask this as a straight-up question.
Lending is a credence good and recognized as such since the depression. BTW: so are legal and medical services as well as accounting,
The "organized" nature of franchising simply inflates the next half-baked, new system financing bubble. The SBA 7a loan ponzi arrangement leaves taxpayers with a sinking feeling.
Les Stewart MBA FranchiseFool :: WikidFranchise
The laws are on the books but due to manpower shortages and computer technology out of the 1950's, SBA's access to the information is limited - which enables the fraud to continue. Taxpayers don't have a sinking feeling because little is publicly known even when the scandals do appear (see SBA/BLX scandal).
"Organized" is correct. There are too many franchisors doing and saying the same thing for it not to be planned in a more 'centralized' way. Until franchisees band together this will be a losing battle.
Les,
I get confused. Are your fellow taxpayers in Toronto the ones that have a sinking feeling about Washington's Small Business Administration 7(a) loans, or are you speaking on behalf of American taxpayers because you know us from vacationing here?
I actually am curious if Canada has an equivalent of an SBA and if the Canadian Franchise Association works with it. Do you have any insights? Because those of us south of you are clueless on what happens up there. What I'm trying to say is that if you only like playing on our side of the fence, then your home turf and its issues will stay largely in the dark.
The most "aggressive" management techniques are developed first in the U.S. and then exported into Canada and then elsewhere in the world.
Canada's program is called the Canada Small Business Financing program and I wrote a paper in 2005 about its use in the franchise industry (here). The UK has a similar program under the (BERR: see HSBC's franchise info). I imagine the BFA, CFA and IFA share the same high ethical standards.
In all 3 countries, their respective government auditors have raised alarms over the unfunded (ie. losses much higher than charges) that will eventually be added to each taxpayer's legacy to their children.
Les Stewart MBA FranchiseFool :: WikidFranchise
Can the problem (and those responsible) be made any clearer? What a great quote:
I have no problem with the increase in the loan program, nor do I have an issue with the request to decrease lender fees. However, for the the IFA to openly request the ability to defraud the U.S. Government by relaxing lending standards is beyond the pale.
How about another recommendation. Let's relax the standards - let the projections on the loan read whatever the franchisor wants in order for the franchisee to receive loan approval - on ONE condition: the franchisor MUST provide every new franchisee a list of all franchisees that opened their franchise between the date this new franchisee signed the agreement and 4 years prior. That list must include the name of each franchisee, contact information, the location, the actual opening date and the actual gross revenues of each and every brand new franchise from initial opening date to exactly one year later. This way the government gives the loan regardless of the "truth" of the projections, the franchisor gets their money AND -- the franchisee knows exactly what they are getting in to. This way all parties concerned are now upfront about the loan and the franchisee truly understands the risks. (No more financial information that fools the new franchisee into coming in inadequately capitalized.)
you can have almost anything your little old pea pickin heart desires.
Consider, for example, how emasculated the so called franchise laws around the world are, both in substantive potential and in enforcement impotence.
When that incredible success model lies before you as an educational message, it is clear that there is no intelligent response to the question Why don't franchisees organize for the purpose of building their own political warchest?
Today the only response is that they don't want to pay. Well, if that isn't the stupidest possible response, added to other even weaker excuses, I can't imagine what could be dumber.
At some point one tends to run out of sympathy for people who refuse to come to their own aid.
It may be time for me to start paying more attention to proposals that are tending to make the prospect of my retirement more attractive almost every month. Obviously somebody thinks I may have an effective message - one worth stifling with money.
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
Richard, you are a thousand percent correct - on all counts. The IFA has the financial clout to manipulate those in Washington to do their bidding AND franchisees are too damn stupid to get up off their a$$es to try to correct the situation.
I posted step by step instructions on how franchisees can look into their individual systems and see if they were part of the SBA scam. I doubt anyone has lifted a finger. I mentioned once before, there are alot more franchisees than there are franchisors. Twenty bucks a month from each franchisee would amount to a substantial war chest in very little time.
You might want to seriously consider that proposal.
it should cost about the same as a pack of cigarettes per day per store for 250 franchisees to fund an effective beginning/start up independent franchisee association. http://franchiseeassociationmanagement.com/
Like the IFA, political action funding is not included in the membership cost. If the independent franchisee association is configured to be a tax exempt entity, it can't engage in political activity. It has to establish a political action committee (PAC) to do that - just like the IFA does.
That will cost close to $ 2,000 per year per store for the association dues.
Since most franchisees want to do it like they do the Kiwanis or their church - about $ 20 per week, they would be better off not forming an IndFAssn and doing nothing than paying money and doing nothing.
For that kind of money the assn can do all sorts of yummie things, including providing cost free access to a decent franchise lawyer for consults. That is probably the biggest bargain in the world considering what franchisees normally pay lawyers who don't know their asses from hot rocks. Not getting a bozo legal answer in the beginning of a problem is itself worth more than the dues.
Many groups don't have 250 members, so I have to be a bit entrepreneurial with them. But if they commit, I will commit.
It is my experience that they still tend to think they should get what they want as a matter on entitlement without having to pay for it. We all know how that ends up, don't we.
Unlike the AFFD, I turn away people who can't/won't commit for enough money to get something done. One group recently talking with me is a member of the AFFD and they say they have paid the AFFD $ 600. Well, you are far better off spending $ 600 at Muldoons than to spend it with the AFFD.
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
Perhaps, I didn't explain myself correctly or it is just that I don't know the costs associated with PAC's. I was thinking of a true PAC for all franchisees not one for each frachise system. $20 a month is $240 a year multiplied by 250 franchisees is about $60,000 per year. Multiply that by how many franchise systems and I think you would have one powerful PAC considering there are thousands of systems. Yes, many smaller than 250 franchises but some much greater than 250.
Please correct me if I am wrong and that costs are much higher than I believe but we are talking $6,000,000 for just 100 franchise systems (given 250 franchisees for each). With franchisees from just a third of all systems contributing you would have about 1000 systems contributing money into a PAC pool - that's 10 times the amount stated in the sentence above. Any thoughts?
I was speaking for both an IndFAssn and a PAC - but your idea of a total PAC for all franchisees is the best model - mainly because it is exactly the same as the IFA model.
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
Exactly where I was going. The IFA is a successful business model (kind of ironic, isn't it?)
As I said, there are a hell of alot more franchisees than franchisors. It will cut the contribution down significantly.
So, when do you want to start?
You probably mean a Failed Franchisee PAC since successful franchisees would have more in common with the political agenda of FranPAC and I personally know franchisees that are contributors to FranPAC.
Nice try Rusty!
franchisees. Do you think they share the perspectives of the IFA? Forgetaboutit!
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
Organizing franchisees is like herding cats. They will never agree on what's important to them and when it comes to important legislation like Employee Free Choice Act and Health Care they would be in cahoots with FranPac's objectives.
Funny I was thinking of the same system. Curious, Rich, how many franchisees would be willing to pay up $20 A MONTH for this. Simple math, given the total number of franchise systems and franchisees would equate to tens of millions of dollars easy with less than a third of franchisees participating.
Interesting. FranPAC is the PAC arm of the IFA. Yes, I am sure franchisees have so much more in common with the IFA than going with one that would actually represent franchisees interests.
Again, name calling. Take the focus off the message. If I saw those numbers I would be fearful too and want to get franchisees away from the idea.
From the 2008 election cycle:
IFA - $63,000 to Democrats; $389,500 to Republicans
Pizza Hut Franchisees Assn - $13,250 to Democrats; $83,500 to Republicans
National Franchisee Assn (Burger King, I believe) - $7,500 to Democrats; $198,000 to Republicans
Assoc of KFC Franchisees - $31,000 to Democrats; $74,500 to Republicans
American Franchisee Assn - 'did not exist in the 2008 election cycle'
These are the associations that were easy to find with a web search. Looks like the franchisee associations that have a PAC set-up, do favor the same 'party' as the IFA. Please add to the list if you have information on more.
It sometimes surprises me when people assume that franchisee associations lean Democrat. They don't. Their members are small business persons who lean strongly Republican.
These are the folks that when they come together to put their collective foot down, not an easy task, that CEOs of large chains can be terminated and boards replaced. And franchise laws are enacted.
JD, what your missing is: its the message not the party. The fact that the money is going to the same party is meaningless. What is important is what message (how to vote) is relayed to the representative. Let's assume franchisors are paying off (donating to) both houses of Congress to get franchise laws loosened. It is then incumbent upon the franchisees to "donate" as much if not more in order to get their voices heard and their message heeded.
Unfortunately, a quick look at numbers does not tell the story. While, yes, franchisees and franchisors may agree with Card Check, they certainly don't agree on revenue disclosure, "taking" of franchises with no legal recourse, etc.
"IFA represents more than 85 industries, including more than 11,000 franchisee, 1,200 franchisor and 600 supplier members nationwide." This quote was copied from the IFA letter to Congress that was linked to by Don of BMM in a response to this article. The numbers are clear - for every $1 franchisees would have to donate, franchisors would have to donate $10 to equal the same amount. Not to mention that there are many more franchise systems out there from which to generate donations - my guess, most of those are weaker systems which would mean franchisees that are even more interested in creating stronger legislation. Its in the numbers - provided franchisees would get off their asses.
Successful franchisees know their P&Ls and don't care about mandatory Item 19 FPRs which means their motivation for involving themselves in a PAC will be about political activities that support their business interests.
Your interests as a failed franchisee are of no interest to successful franchisees. You need a Failed Franchisee PAC or a Franchise Victim PAC. Good luck with your hobby horse.
It is in all franchisees' 'business interests' to publish the actual numbers. For successful systems, it will increase demand for new and secondary sales as investors become informed of the "profit potential" of that particular system (just like a stock). For the weaker systems, it will kick the franchisor in the ass to improve the program or risk future sales. For the franchisee in the weaker system, it is almost impossible to sell a money losing site unless it is given away so it doesn't really affect the future sale of the business in a crucial way (unless, they, too, are trying to scam someone to get out of the damn thing)..
As for developing a "Failed Franchisee" PAC - be careful what you wish for. There are a hell of a lot more failed franchisees (look at true turnover/failure - not your cohorts' "closing" rate) than successful ones, which goes to speak for the quality of franchising. Besides, aren't you in favor of successful franchising? That is all I am looking for. Or is scamming OK with you?
It is unlikely that your dream of a united franchisee PAC will ever be realized.
It is impractical since you believe that mandatory Item 19 FPRs are some kind of panacea for what ills franchising and your PAC's focus would be FTC Rule revision. Ain't going to happen.
Rusty when are you going to stop trying to prove that your failure was everyone else's fault and none of your own? You need to help yourself heal by honestly admitting your role in the matter and that your projections were, well your projections. If the projections were fake then you were the faker.
Yes, my projections and those of the 130 other franchisees within my system between 2006 and 2007 (all verified by the SBA). Plus all those of Cuppy's at $175,000 net op. profit in their first year (and I could continue with others if you would like). This is the very reason why the IFA wants to loosen audit standards of SBA loans and strengthen the guarantees. The IFA doesn't want more systems investigated (I am certain at this point they are aware of what is happening). Loosen the auditing standards and they are home free. Also why you continue to try to spin the argument. You've admitted that the scam reminded you of your own system, you refuse to state that you would like to strengthen good franchising and refuse to call for the end of scamming. Name calling and no facts only strengthens my side.
However, I will concede one point: I don't expect franchisees to get up off their asses to fight. In that regard you are most likely correct. Many refuse to join the fight out of fear - exactly how the franchisors want them.
You make a lot a claims about how you and 130 franchisees were scammed. In fact you state you have proof! So I call, prove it.
I already have to those that matter in looking into it. And, in this matter, the one scared is the IFA which is why they are calling for the loosening of auditing standards. Once you understand how the scam works it is very easy to detect. (oh, and it should be obvious by now the elementary school name calling has no effect) but it does give me a very good clue of the intelligence and maturity level of "Guest".
You are an anonymous poster a low traffic blog and forum. No one is scared of you and you have no credibility just innuendo and unsubstantiated claims.
You are an anonymous guest. Remember the old saying when you point a finger at someone, you have three others pointing at you. Guest why don't you reveal yourself? It would be interesting.
It's against policy.
Rogue zors use that line, "It's against policy," when they don't want to put things in writing. What a cop out.
its unfortunate you feel that way.
Rogue zors use that line, "It's against policy," when they don't want to put things in writing. What a cop out.
Only anonymous to some, yet you seem scared enough to continually respond with no facts just name calling - AND EXCLUSIVELY TO ME in order get the readers off the message. The credibility comes with numerous franchise systems with significant franchise failures, all with substantial purchases through SBA loans. (I call them failures and not closings because we all know the IFA and franchisors have redefined the word "closings".)
Yet, for each franchise system all the SBA loan projections show first year net operating profits of almost the same amount (dependent upon the loan amount requested) but few, if any, franchisees actually reach those numbers. Curious how all franchisees with SBA loans uncannily have a projected net profit just high enough to get loan approval but hardly any ever attain those projections.
It must be a coincidence. (With thousands of loans.)
BTW, you've never responded to whether you want to get rid of the scams and only promote those systems that actually work. We are all curious to hear your answer.
and we can begin with your franchisor and loan consultant. The proviso is we need facts.
Certainly there are franchises that are scams, some that are marginal and some good-to-great and if you Oldsword can help direct people away from scams and marginal franchises then you should.
Clement (Lonny) Smith
They're setting you up.
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
Don't worry, Richard, I had no intention. Many here are all too well aware of how litigious my franchisor has been in the past.
By the way, the projections are just part of the scam. How about the consultant double dipping with the fees (a practice specifically prohibited by SBA regs)? That was a good one. My payment of thousands and the bank paying them as well. God only knows where all the payment money wound up. Funny, considering so many of us were guided to this particular loan consultant by the franchisor.
What is truly troubling however, is "Guest's" unwillingness to denounce franchise scamming. They thought there were enough similarities between my franchise scam and their own system that they thought they maybe my franchisor. They refuse to denounce scamming and all they can do is call someone names.
Old Sword, let this discussion die with honor. Trolls and lurkers continue to drag this out at the expense of the BMM community’s patience.
Either answer the question to silence the guest or end the vague response chain which allows the guest to keep poking fun at your expense.
Poor Rusty knows he has been purposefully vague in his accusations. It is time for him to put substance to his charges.
The financial swan that you speak of - was he recently on "Little People, Big World" playing the "hipster hippie w/ponytail" character? If so, I think we have identified the "facilitator". We should share stories about our little friend.
Richard,
Rusty Oldsword has made many claims about his experience with his franchise concept and loan consultant that if true he should reveal to warn others so they can avoid his fate just like Barbara Jorgenson did with 123FIT.
Guest
He has been doing that in here for over a year and a half now. He and I laugh about it all the time, and about how you respond differently according to whether he is saying something as OS or saying the same thing as Barbara.
If he posted his picture it wouldn't tell you anything because he wouldn't post his real picture just as he doesn't post a real picture of anyone we know when he appears as Barbara.
Y'all are really a hoot!
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
I didn't see that one coming. Funny though I find Barbara harmless and amusing while Rusty is pretty much a franchise moron or Franwad who thinks he has found "the smoking gun" of franchise scamming.
I don't find it amusing when people go out and purposely hurt other people. You must think people telling the truth about their experience is a threat. It might make people think twice before signing on the dotted line. You must be a shill or just another person who believes destroying people's lives is alright. If you are may you get what you deserve.
how do you know Rusty Oldsword is telling the truth? What facts has he shared?
It doesn't surprize me that zors give false earning claims to banks. It doesn't suprize me that loan officers get paid more than you know. Richard even said this happens in all sectors of business. A wise lawyer said to me, "It is a zoo out there." People need to be vigilant and very cautious. Finding the right lawyer can be has difficult as finding the right franchise.
No facts about his franchise, loan or actions. No not one fact at all, we're supposed to believe his story when we don't even know a thing.
Oldsword, the suggestion that franchisees pony up money was talked about two years ago by Paul & Michael (I believe) and how much money they could raise if unified. It's gone nowhere in two years, and I doubt it'll go any where in the future.
The two 'franchisee advocate' type associations that have been talked about on here both struggle. AAFD lost $103,000 for the year ended 4/30/08, and has net assets of $(343,272). The American Franchisee Association had a whopping $18,050 of membership dues received for the year ended 9/30/08 and has net assets of $29,870.
We tend to do a number of things to which we don't expect immediate positive responses. One of the principal purposes of BM is education, and education has to start with basic principles and, over time, teach more complex lessons - much like those folks who first thought that the earth was the center of the universe and that the earth was flat.
Through education over time, the number of people who still believe that the earth is flat has been reduced to about only 86,000,000 by last count (the last presidential election).
Michael and I consider ourselves to be the Copernicus and Gallileo of franchising.
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
is because the FDD in many cases says they can't. I believe if this is in a disclosure document people should not sign. The time to herd the zees is at the beginning of a new franchise system. That is when they have the money. When people have been gouged from the beginning they are in a desperate situation. That is why they have no money to put into a association. You make it sound like all zees are too cheap to join an association. In many cases they are already down the path to bankruptcy with the help of a rogue zor.
Without limiting the other provisions of this chapter, the following specific rights and prohibitions shall govern the relation between the franchisor or subfranchisor and the franchisees:
. . .
(2) For the purposes of this chapter and without limiting its general application, it shall be an unfair or deceptive act or practice or an unfair method of competition and therefore unlawful and a violation of this chapter for any person to:
(a) Restrict or inhibit the right of the franchisees to join an association of franchisees."
It is a good idea to research the laws of your jurisdiction. If I had known about you I would of gone to you. I know you would of saved our family from alot of grief. I suggest anyone in the state of WA. who is interested in a franchise please look up Howard Morrill.
NADA, AAHOA, NFA and many other franchisee associations are quite profitable. As you point out, AFA and AAFD have struggled over the years. Any thoughts on why?
I say lawyers.
As I said, "provided franchisees would get off their asses." In this instance, "Guest" is correct. Getting franchisees to fall in line is like "herding cats". However, IMO, the AAFD has performed very poorly. They are to franchise negotiations what Prime Minister Neville Chamberlain was to international negotiations. Trying to negotiate to win friends when your opponent is bent on destroying you doesn't work. Look at who received awards by this great "august" body for franchising excellence.
Not to mention that few franchisees have even heard of them. However, I do agree with you, it would be an uphill battle.
Please post their contibutions.
You can't lead from the behind.
Richard and OS,
Please tell me it's simply legitimate businesses buying thier own laws via regulatory capture and influence peddling and not the good fellows and their Russian friends.
Please?
Les Stewart MBA FranchiseFool :: WikidFranchise
and the Russian Mafia is style, not substance.
People will not recognize or serve your interests for free when they are being paid to do the opposite.
Grow the hell up!
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
It is one thing to have IFA over the moon about increases to SBA but it is another thing entirely to have IFA wanted oversight relaxed at a time when failures to regulate lie at the centre of an international financial crisis. That is so absurd it should be hilarious … but that isn’t close to funny.
The reported manipulation of SBA has now been given the IFA stamp of approval. Worse; they know that anything that promotes the growth of franchising improves the status abuses of IFA … anything … anything goes. Nothing is too outrageous. Why not goal people for not buying into a franchise?
That is utter crap. If that was all that was required this would not be so true;
No the letters have little effect when franchising has a need. Enhancing the ‘health’ of franchising requires a lot of ‘nudge’ and a lot of ‘wink’.
Take out the existence of SBA and in Australia we see the same evolution of credit issues. Lenders have lost confidence. Lenders have tightened up. Lenders know they get burned in the scams. Their customers the suppliers get burned in the scams.
Everyone gets burned in the scams. Lenders still want the business but they now find a need to be particular to avoid the cost of scams to them. And isn’t that a tad difficult when almost all finance applications tend to be a fudge.
I have no doubt the FCA has attempted to have SBA duplicated in this country. For all I know that could be the Minister's offering of a franchising fix following 3 inquiries that concluded that franchising is full of trickery and damage.
Does anyone really believe that anyone other than a franchisor can forecast the reality of their franchise financial model? Or was it the ‘Shadow’ who assisted the franchisee to fudge?
And that isn’t the core problem. At the heart of the tightening of finance is a lack of overall confidence because the industry is somewhat dominated by systems that cannot project real profit and at least in the short term. And the IFA says; ‘let the free market decide who forecloses on whom’ just as the FCA does.
Not long ago FCA’s Steve Wright suggested that the continued advertising of offerings at franchisebusiness.com.au was an indication of growth. What he didn’t mention was that the site represented the turnover of franchises.
Richard is spot on when he criticizes those too stupid to be a part of, encourage and develop a war chest. How stupid are the quality franchisors that tolerate IFA’s support of the scams?
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