The AAFD's Focus on Fair Franchising

There are those that feel that the AAFD inadvertently may lure prospective franchisees to franchise systems that do not have proven business models. While I share those concerns, I feel compelled to set the record straight about the AAFD's mission and efforts to protect franchisee rights and inspire better franchising practices.

First let's be clear -- the American Association of Franchisees and Dealers came into existence to advocate franchisee rights and legal protections. Our focus has ALWAYS been on leveling the playing field so that franchisees are better protected. The AAFD has never engaged in judging business models, BUT we have always cautioned prospective franchisees to put such evaluations at the top of their due dilligence efforts.

Since we introduced our Fair Franchising Seal 13 years ago, the AAFD has always published a disclaimer, distinguishing our focus on franchising agreements and practices that meet our standards and disclaiming any assurances that a specific business model works. In practice, our Fair Franchising Seal is only awarded to companies with the approval a 75% of their franchise owners, and owners are unlikely to vote approval if the business model isn't working.

Three years ago, the AAFD began offering a new certification: AAFD Accredited Contracts. This certification was intended to encourage start-up companies to engage fair franchising with an economic inducement that comes with AAFD Accredited Contract status. We also extend Accredited Contract status to troubled companies that are seeking to repair and reform. Our goal is to use marketplace inducements to empower independent franchisee associations to have negotiating leverage, and to direct prospects to franchise systems that are built around collaborative cultures.

Unfortunately, we learned with our Cuppy's experience that our original disclaimer was insufficient with Accredited Contracts, for which there is even greater risk since the accredited company may have noo history (or a bad history) to establish it as a worthy player! We also learned that we need to clearly distinguish between the Fair Franchising Seal and an AAFD Accredited Contract.

Last week the AAFD completed the process we started last August of overhauling our efforts to distinguish between the Fair Franchising Seal and AAFD Accredited Contracts as well as our disclaimers of each designation. (Most of this work was completed last October, and Mr. Webster mispoke when he said that we had just created a disclaimer a week ago!).

The AAFD has now graded more than 60 franchise agreements, and we are about to publish our comparative data so the marketplace will be able to appreciate that there are vast contractual differences (as well as business model distinctions)among franchise offerings.

I particularly liked Mr. Bibby's analogy to buying a car, but disagreed with his basic conclusion. I think most car buyers base their buying decisions on the look of the car, when they likely should be more concerned (or at least equally concerned) with the framework, body and engine. In franchising the engine is the business model -- it must be the prime driver of the deal. But the contract provides the framework of the franchise vehicle.

The AAFD is the largest and strongest organization supporting franchisees and franchisee associations in the history of franchising. About 40% of all known franchisee associations support us. We are the only such association that has survived 5 years of existence, having just celebrated our 17th Anniversary on May 1! And yet our resources force us to focus on our core purpose -- and that is (and always has been) to support fair franchising. We do this by supporting strong owners associations that can negotiate on behalf of their members, to define fair franchising, and to identify and recognize companies that have adopted fair franchising practices.

The AAFD offers the most effective and affordable program for franchisees to organize and maintain independent associations, and the work of our Standards Committee to define fair franchising practices is our proudest achievement. As will soon be seen, the committment to fair franchising by AAFD Seal Recipients sets these companies apart by a wide margin.

As much as I would like us to do more -- for now this is what we are able to do. I will depend on our friends (and detractors) in the social media to remind investers (as we do ourselves) that there is more to a good franchise than a fair contract!

Bob Purvin
Chair, Board of Trustees
AAFD