Waiting for Emergencies Before Establishing a Franchisee Association

DESPERADOES – Waiting Until There's an Emergency

Most franchisee communities do not establish a franchisee association until there is serious difficulty. When I say serious difficulty, I mean that there are fundamental, profit killing issues that have driven people out of business and destroyed prospects for positive relationships.

There are many issues at play by this time. Among the more salient of these you will usually find that they believe they are being really ripped off by the franchisor’s extraneous revenue stream derived from their purchasing; the advert fund is ineffective and is being used as a slush fund for things having little or nothing to do with advertising; original franchise agreements are coming up for renewal and the new agreements that are being insisted upon contain really terrible terms; the franchisor is insisting upon very expensive upgrades in store equipment, construction and appearance – the new look; the franchisor has decided that the franchisees have it too good and is establishing more stores that encroach upon the effective operating radius of existing stores; the franchisor is about to sell out to/acquire a competing system that is believed will now be free riding on the existing franchisees’ investment; and the franchisor’s children are being placed in key positions for which they are unqualified and the system is going to hell in a hand basket. There are many more such casus belli issues.

The interim years that could have been enhanced by having established a franchisee association immediately that by now would have had substantial credibility did not include the franchisees committing resources to it. The resources to which they must now resort are resources of conflict. Litigators are being interviewed. People who have no idea what their rights and obligations really are in light of the current situation are talking a lot of nonsense. The first priority is to find a lawyer who will, on a contingent fee, bring a “class action” lawsuit. A lot of time is wasted. Thousands of bitchy emails and rump meetings have occurred, and the franchisor/franchisee relationship is now at loggerheads, to put it mildly. The environment is chock full of emails that represent ridiculous accusatory trial/arbitration exhibits that the authors will later wish they had never written. Ringleaders have been identified and targeted.

[See Representing Groups of Franchisees in Litigation at FranchiseRemedies.com]

Incompetent meetings are held by franchisees that are always infiltrated by the franchisor who knows everything that is said and done and by whom. People are doing all sorts of things that are hurting their interests because they have no proper guidance. Raising an adequate budget/war chest isn’t happening because no one knows the right way to do it. In the old days it was nigh impossible to find a well qualified franchise litigator because there was no Internet. Now it’s much easier, but because they waited so long before getting off everything they wish to accomplish will be ten times harder and knives must be placed against throats because there is no mutual understand and no good will left.

Unfortunately, that’s the way almost all franchisee associations get established. Whatever resources were saved by not doing it early on are consumed many times over because of the messy circumstances that must now be dealt with. Does that sound like a ridiculous way to go about it? Of course. Is history replete with examples of groups and even nations dealing with difficult relationships in the same manner? Just think of all the lollygagging by Europeans while Herr Hitler overran Europe. Those who refuse to learn from history will repeat history. A remark in the humor section of BlueMauMau is perfect for this situation – “No nations that have McDonalds franchises ever go to war with one another”.

Litigators really love it when it happens this way, because a good evangelist litigator can proselytize one hell of a retainer out of groups like this. To a litigator, the favorite clients are terrified wealthy people and very angry wealthy people.

I have been through this scenario many times with desperate groups of franchisee who are their wits end. It is an awful way to do this. They have suffered terribly for having waited too long to get a good, effective franchisee association established. So much of what could positively have been accomplished is now going to be irretrievably lost. They will interview two kinds of lawyers. The first and preferred is the guy who looks at the situation and says that litigation is unnecessary – which is what everyone wants to hear. If they hire this person, the next two years will be spent with the franchisor pretending to lend a sympathetic ear while continuing with whatever is in play that is causing all the upset. The budget will be gone with nothing accomplished, and the support for an association will usually evaporate. Does it always happen this way? No. There are instances in which right mindedness raises its beautiful head. But wasting time and resources in chat when circumstances are desperate is most probably going to achieve nothing. Why would anyone who has been getting his way without interference for many years simply decide to so it otherwise because he is being confronted by a very bright business lawyer who is afraid of confrontation? 

At this point, anyone who tells you that litigation/arbitration is unnecessary simply does not understand how life works in franchising. No one will believe that compliant, albeit bitchy franchisees represent a threat in the absence of aggressive confrontation. Is this the most expensive and least desirable way to go about establishing a franchisee association? You bet. Then why do it this way?

But that’s usually the way it happens. More’s the pity.