Lawmakers know didly squat
It would appear that historically when inquiries into franchising are conducted we end up with a relationship between submissions and recommendations that overwhelmingly support strengthening of protection for franchisees but then there is no relationship between those recommendations and any eventual changes to law and regulation.
So why bother?
The inquiry process [inquiry terms of reference – submissions – recommendations – parliamentary debate – produce compromised law] may be missing something.
Perhaps an addition to the process where everyone involved should acknowledge that the lawmakers know diddly squat about the complexity of franchising and the intrinsic ability to re-interpret and manipulate any small loophole in law to produce a consistency of more one-sided outcomes for the parties who have the big bucks.
Perhaps the most dangerous aspect of lawmakers is that they mistakingly believe franchising to be a simple concept?
Perhaps there needs to be a process where franchising experts review what lawmakers offer before it becomes law and if so, what would be an acceptable basis for selection of an expert?
I'm sorry but the idea of franchisees paying dues
to get gov't relief, maybe a private right of action under FTC law is useless. Congress will not act or reform, to protect franchisees. Be friggin' serious.
The bullcrap that is the AAFD and its leadership, the CFA, and all these activists groups gets nothing accomplished.
Franchisees need to take care of their own matters. Their own independent franchise groups need to hire a lawyer that can beat the franchisor into submission and sue the pants of the franchisor if needed.
The only solution to enforce franchisee rights is a well funded litigation biggy bank and an SOB smart lawyer to represent their specific issues.
These associations are all useless for the franchisee.
I brought forth well documented fraud issues to the FTC
about a franchisor. Their answer was pretty much "yeah, you and everyone else". They look at 6% of ALL issues brought forth to them: consumer, franchise, antitrust. Of the 6%, they pursue less than 2%. Usually around oligopolies, monopolies...big issues, not little franchise issues.
Good luck with PACs, legislative reform, and having the gov't on your side.
Courts uphold that the most sacred right that people have in this country is the right to privately contract. You do so, therefore, at your own risk.
Before you enter a contract, you need a lawyer, not a PAC, not an association of fairness. You need to protect your own rear. That's well founded in law.
Franchisee numbers and potential influence
The estimated number of franchise locations in the USA is reported to be as few as 400,000, as many as 650,000.
If you had each one put in just $2.50 annually, you would have a million dollar franchisee PAC, using the conservative estimate. If you don't think that you could create some significant legislative influence and leverage using that kind of money on an annual basis, you're mistaken. (Even if you only got half of the locations to donate to the PAC, $500,000 far exceeds the current dollars in the IFA's PAC, just as an example). Unfortunately, most franchisees are not willing to invest 25 cents towards legisative advocacy, and therein lies the problem.
I guess this argument would get too theoretically political
but there are many PACs tha are well funded that can get nothing done. I see what you are saying, but my take is that anything that will serve to 'protect a franchisee' by providing more authority to gov't agency is just a waste of time and money. And that is the sort of middle where if anything the dems and reps will meet.
Look at the CFPA debacle.
The CFPA, Obama's newest idea for another regulatory body of bureacracy that will probably fail as did the SEC and FTC in preventing predatory lending and reckless investment practices, is still circulating in the finance committee. It is now being considered to be a sub group of the fed to appease the republicans. The bipartisan interests will destroy this bill.
I'm becoming more libertarian by the day.
Re: Mufflerman and Franchisee Numbers
Sorry, I was writing my piece while you, apparently, posted yours. I agree with you but they will need much more than $1mm to compete. You are correct that "most franchisees are not willing to invest 25 cents towards legisative advocacy".
Re: Franchisees paying dues
Guest, if you are making the point that most franchisees are too ignorant to see the forest for the trees and will refuse to "pony up" on paying dues, then I agree with you. However, do the math. For every franchisor there are many multiple franchisees. My guess would be an average of 50 franchisees for every franchisor (many more franchisees in some and much fewer in others). The amount of money generated by an effective, grass roots effort would overwhelm the franchisors (that means contacting each IFA to spread the word and contacting multiple units of those systems without an IFA). Basic math: $100 a month = $1200 per franchisee. $1200 x 50 franchisees (avg) = $60,000 per franchise system. $60,000 x 2000 systems = $120,000,000.
Now, let's be realistic. Is this number anywhere near probable? NO! However, just 10% of that number will more than compete against franchisor lobbying. I guarantee you, going individually (each independent franchise group) will cost more per franchisee AND be much less effective because the many poorly performing franchisees (that is the reason you are going up against the franchisor in the first place, isn't it?) will not be able to hold out and pay up long enough to keep the money spigot going to fight and win. However, most could afford $100 per month. And again, we are only talking 10% of the total population.
Will I hold my breath that this will happen? NO. Most franchisees have their heads either up their a-- or stuck down in a hole trying to duck for cover. With ineffective groups like the AAFD around nothing will get done. It must be a proactive LEADER, willing to take charge, to get this done.
Lobbying for WHAT?
That's the key point...more gov't bureaucracy intervention rights for agencies that currently don't do anything? Better remedies in private rights of action? That arbitration should allow for appeal?
You still have to have the money for a lawyer to avoid being hosed by a contract and the money for a lawyer to challenge it. If you enter a private contract, your first line of defense and your best money spent is on a good lawyer.
I see, Rusty...
we're talking Utopia. I would agree that in Utopia, or Franadu, a PAC could be funded to see
legislaition being passed to do more to discourage fraud and have better remedies available to franchisee to encourage enforcement. Also to prevent unfair terminations, more consequences for breaches, etc. Maybe the brass ring would be to get Congress to create legislation that enforces some fiduciary duties on franchisors.
But don't hold your breath. Congress is simply dysfunctional as are the gov't agencies they fund.
I'd rather see franchisees band in militias against the enemy vs. create a lobbying armies to enact treatisies.
I don't live in Franadu.
Following your logic (I am being kind), it is then foolhardy for the IFA to continue its fee collection and lobbying because "Congress is simply dysfunctional as are the gov't agencies they fund." Tell that to all the special interest groups that spend billions every year to manipulate the system. Franchisors and the IFA have time and time again thwarted legislative attempts (Conyers et.al.) to level the playing field and have been successful at not only maintaining the status quo but strenthening their legal position over the years.
My "mathematical calculation" was based on 100,000 total franchisees. According to Mufflerman, the minimum is 450,000. So, forget $100 per month per franchisee. The dollar figure, based on 400,000 is $25 per month. THEN take only 10% of that number and you still get $12,000,000.
Congress isn't dysfunctional. It is merely FOR SALE.
Congress isn't dysfunctional. It is merely FOR SALE.
Couldn't have said it better myself. John Kennedy wrote Profiles in Courage in 1955. I don't think any current members of Congress have read it, and those that have are seemingly unwilling to focus on anything other than getting re-elected. From the moment they are elected, congressmen and women are fund raising for their next election. With the prospect of Corporate funding, it is only going to get worse.
The success history of political lobbying and other money
provided to Congress of the books and on and the results perceivable to date make it ridiculous for anyone to think anything will ever get done without a warchest.
It has never changed since the first government appeared on the face of the eatrh.
A letter to the editor in today's Washington Post by Marc Gefferoy and R.R. Reno suggests anonymity be tied to campaign contributions. The theory is that if a politician is unable to determine from whence the money comes, and would have no way to confirm the claims of PAC's or other donors, they wouldn't be sure whose palms to grease when it comes to legislation. Like the secret ballot keeps someone from buying your vote because they can never be sure if you will follow through, an anonymous campaign finance system might do much the same.
Nero Fiddles while Rome Burns...
...as you all play the PAC fiddle and wait for better legislation and more gov't enforcement...or loosening of small business credit...or 'free' healthcare...
franchisees without good associations, too stupid to hire a lawyer, or simply screwed continue to burn every day.
I'd rather buy a lawyer than a congressman's vote for a bill that's going to require me getting a lawyer anyway to enforce it.
Re: Nero fiddles
You can hire the lawyer. You can spend untold tens of thousands of dollars. Unfortunately, though, there are no laws for them to enforce. That's the problem. And you will find most people, including myself, against the "free" healthcare. Not looking for a handout. Just as level a playing field I can get. And PAC money gets you there. Yes, in the long run. But better than never.
Anything that interferes with the franchisor’s contractual form of eminent domain will be fought with big dollars. The way I see it those big dollars represent not just that which comes from the likes of IFA [members and affiliates] but supported to a large degree more specifically by the other major beneficiaries to shutting down any attempts to achieving reasonable law reform.
As one of BMM’s scholars recently suggested; ‘franchising is the best thing to happen to lawyering since the rear end collision’. Law firms come out in force at the mere mention of reform.
Australia in many ways seems to be a microscopic version of the US franchising racket with lousy law, poor access to remedy, corruption and fraud. In late 2004 here, franchisee representatives were warned by FCA that it had $5M to shut down any attempt at reform. Well they spent and they bought influence and we still managed to get our government inquiries into franchising.
That came about with a total budget of virtually $zero except for the individuals that spent what they could and comparatively speaking, with relatively few stakeholders dedicated to the effort. Some threw rocks and made noise while others shook hands, opened doors and gained a whole lot of support from those with good intentions and effective influence.
Here 60,000 franchises at $100 would have been able to reach more people and with $6M we actually could have ended up with a result a step closer to being reasonably effective. The point is that the few did make a difference. No one can tell me that half a million US franchisees represented under one umbrella association cannot achieve political influence.
The cost of association membership is a cost of running a franchise business. That’s the way franchisors see it and there should be no difference for franchisees except it should be seen as an obligatory insurance cost.
A number of comparisons can be made between franchisees and chickens. They are caged and plump ripe for the slaughter. They have wings but they have been conditioned not to fly. Confront and they scoot and attempt to fly in all directions. Enter the chop and they freak out and are consumed. I accept that dealing with chickens is a big task but the $math is irrefutable just as buying law is a fact of life.
There are even more parallels with power conditioning that saw trains fill and head off to relocate in Auschwitz.
The fight for a reasonable franchise playing field is tough because the dominance within the industry of foul franchises means governments have to consider the potential consequences to economic [including employment], contribution. If cleaning up franchising meant that a small element of the sector would be pulled into line or thrown out then either it would be cleaned up or it would cost much more to buy political cooperation to control the smell.
But it isn’t a small element of franchising that constitutes problem franchises is it? Those that argue against one franchisee voice are impatient and need math schooling. This is a tough and long haul but there are other benefits along the way. While we look at Australia’s recent ‘reform’ many, as do I, realize that ultimately nothing much has changed and the dollar has won the day.
The noise alone in Australia drew many more to realize that something must be done and convinced many more investors that franchising is no safe haven. Patience is required even with a single franchisee association coordinating body but patience is a rare franchisee trait and along with selfish short-sightedness, the real enemy of reform.
The call to arms for franchisees to forget associations and litigate individually does not cater to those who cannot fund a phone call and for those that can litigate the results are going to be deemed weaker than what could have been with better law.
Franchisees can have the dollars and create change if the chickens realize that they have wings, that their generation is in jeopardy and they then do the math on the size of a potential war chest. To do nothing is ‘not the [insert country] way’.
Or at least it wasn’t for previous generations where monstrous obstacles suggested ‘people’ could not make a difference. Apartheid is one example but effective people driven reform examples are endless.
People buy the government they deserve. Franchisors have known for a long time that when you have the money you are unlikely to need to outlay all the money. A financially strong singular franchisee voice will have strength far greater than the deterrent dollars they don’t have to spend.
The existence of a counter-power will bring about change for existing franchisees and temper the created franchising aura that seduces people into great heights of foolishness. The single voice pushing for intelligent investing will fix many a bad franchisor’s wayward ways. It should be that franchisees determine franchise network growth either because they support the support the brand or strangle it until franchisees aren’t being screwed.
Franchisees can make differences today and the only reason patience is required is because chickens are too stoopid and to realize they have wings. On a selfish note; 3 shots at a national franchisee representative body in Australia have collapsed due to lack of funding and the influence of the FCA. I’m at a stage where I hope one day an international franchisee body will assist us to show our chickens they don’t have to be slaughtered.
Meanwhile; without a head we can still make an awful lot of noise even if sometimes that noise is associated with whatever we can muster to hit the fan and then stick.
What is the procedure for a new start up franchisor to sell franchises? Do they have to apply or be approved to sell franchises in various states? Are there state government agencies or departments that grant approval for the sale of franchises in their state? What documents or application does the franchisor have to submit?
it is the schools
And why does everyone ignore a public eduction system that has absolutely failed in its mission to educate? Only a functional ignoramus would get suckered into the churn and burn concepts in the first place. If you got taken, go back and blame you school system and the college that graduated you. There is where the real fraud begins. The public schools perpetuated a fraud by making you believe you were educated and capable of dealing with the world. You are not, you are but an infantile being, pampered, sheltered, fed a lie that you are such a an individual precious little snowflake of merit and worth. The reality is you are an ignoramus, and there is truly nothing remarkable about you at all. And yet you will persist in your fantasy. The FTC is not the problem, the problem is that you thought you were equipped to actually think for yourself and be in business when at best you were equipped to salt french fries under an overseer.
Snide and Rude Remark indicates the TRUTH hurts
Should our school systems start teaching students to distrust their government and to understand that under capitalism that partners with government, the little fish are groomed to be eaten by the big fish!
Give me one good reason why franchising is regulated by the FTC and not by the SEC. The FTC Rule made it possible for franchisors to sell franchises to the public without disclosing the risk as known to the franchisor. The 23 items of disclosure in the Franchise Rule act as a red herring to disguise the risk of the investment in a franchise and to hide third-party churning and turning from the regulators and the courts. .
As reported by the experts on this Blog, like Richard Solomon, the average franchise agreement (the contract for sale) is purely a license for the franchisor to lie, cheat, and steal, as necessary, to himself survive.
Let the ranting commence!
Guest says: "Should our school systems start teaching students to distrust their government and to understand that under capitalism that partners with government, the little fish are groomed to be eaten by the big fish!"
Fixed to reflect current political reality: .... understand that under crony capitalism that partners with government, the little fish are groomed to be eaten by the big fish!
OCCUPY WALL STREET !!!
what is hilarious Granville
Is that socialists don't see that it is the socialist policies infecting the free market causing many of the business and economic problems we have today.
Guest chugs the Kool Aid!
Guest says: "...socialists don't see that it is the socialist policies infecting the free market causing many of the business and economic problems we have today"
Ahh! So if only the market were freer and with less regulation, Quiznos and Cold Stone and UPS Stores and Huntington Learning Centers would all be profitable. Or is the answer lower taxes for the Schadens, would that make the Zees successful???
I'd be with you though as to if the government wouldn't back SBA loans, that there would be fewer loser franchises sold, less profit for Pirate Zors, and fewer Hurt Zees. (We've never had an SBA loan.)
But back to the Socialist thing: So if ony there wasn't so much Socialism, we'd all have health insurance! But wait, I thought that Socialism was going to get us all health insurance. But that we don't want it because it's Socialist. Oh, it's just SO confusing! Seems like Socialist is just what ya call anyone or anything that you don't like, since it's hard for me to beleive that anyone actually wouldn't want all Americans to have health insurance (as we call it, "access to medical care might be more accurate).
Well at least your corporate overlords have you well trained in the company line!
You dont get it.
Socialism is when the government attemots to replace the free market or tinker with it. socialized healthcare is no good. Socialist business lending and government guarantees are no good. I believe in elevating the standard and upward mobility. I do not subscribe to bringing everyone to the lowest common denominator. England and Canada's healthcare is inferior to the current U.S system. Governments are inefficient and largely ineffective from a value standpoint. Only a fool would want more government. Also, no regulation would stop morons from buying garbage; especially when the government is guaranting the loan.
I am proud to say I have been SELF employed since graduating
college some 25 years ago. No corporate overlords here.
Socialism is when the government attempts to replace the free market or tinker with it with government intervention or outright replacement. Socialist business lending and government guarantees are no good. With regard to healcare, I believe in elevating the standard and upward mobility. I do not subscribe to bringing everyone to the lowest common denominator. England and Canada's healthcare is inferior to the current U.S system. Governments are inefficient and largely ineffective from a value standpoint. Only a fool would want more government. Also, no regulation would stop morons from buying garbage; especially when the government is guaranting the loan. Especially when the government doesn't even enforce the regulation it passes, of staffs the agencies with dinglebells.
With less government funding of franchises and with less unenforced regulations there would be fewer people who could afford to make their stupid decisions and who would have less false confidence.
You missed my point.
I am a business owner offering my opinion.
Government should foster competition.
Not guaranty overleveraged borrowers. Not run healthcare. Look at our ebismal education system. Government is a big part of buyers' confidence and ability to afford bad decisions. If there were less regulation in healthcare there would be more competition and lower cost. If government were not involved in franchising the free market and lending sources would weed out the bad apples. Government sponsorship keeps them on the vine.
Tough cotnracts aren't the problem. The problem is that really
stupid poeple sign tough contracts without understanding how they work.
If there were no FranWads, the contracts would have to change for the better. That really is what a free market is all about. Market forces - educated/educable customers causing the terms of trade to move in their favor.
It is impossible to legislate brain power. Fools and their money will always be some party!