Franchise Ownership? There’s No Such Thing

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• I agree with you, and was forced to wage a nasty battle with a large franchisor and it’s parent company for over a year. With virtually unlimited resources, their goal was to run me out of money. They ultimately settled, and I survived, with a very keen understanding of the legal inequality of the relationship.

  I was blessed to have good lawyers, and a judge that did not like bullying tactics by a franchisor and parent. Most franchisees that do battle ultimately lose most, if not everything because the cards, and the law, are strongly stacked against them. And you are right, a franchisee should never look to the FTC for help. Many people that sign franchise agreements just don’t understand all of this, thus my hope they will find a good franchise attorney before they sign, understand the legal traps that are built into most every franchise agreement, and go in with their eyes at least partially open.

  While I do believe there are some good franchisors out there, I am not convinced there are any good franchise agreements.

• Bill Bandy

  Agreed.

  And it is never franchisees’ fault for not doing enough to investigate prior to signing a franchise agreement. The system is set up to deceive them.

  Deceit = fraud. It’s pretty simple.

  The system supports fraud. And there are plenty of people intentionally taking advantage of that fact. Many parties are involved in the deceit.

  In civil RICO, multiple party involvement means multiple defendants.

  I invite you to keep an eye on my podcast. My co-host is an attorney with many years of RICO experience.. Our next series of podcasts will be about the Reade and Biden allegation and what the rest of us can do to figure out reality as we look at the problem from afar.

  We’ll address offender patterns and victim behaviors in that context and then, later, move on to franchising as one of our future topics. Our plan is to get multiple RICO trial attorneys in different jurisdictions with criminal prosecution experience involved. We’ll be looking for victims who weren’t as fortunate as you and who didn’t settle because they couldn’t.

  It is completely reasonable for people to believe in the FTC and its apparent regulations before they sign a contract.

  This is RICO RICO RICO.

• Bill Bandy What started the fight? Thanks.

• Regardless of Bill Bandy’s answer, I have plenty of case studies in which the franchisor started the lawsuit with the objective of taking everything in the name of “enforcing the contract.”

  The civil litigation is part of the corruption. There is little franchisees can do under contract law and without a private right of action.

  Civil RICO is the answer.

• It was a complex set of facts and circumstances that had developed after 3 major changes in ownership of the franchisor.

• Anne Janai (McMullin),

  My experience is that new franchisees sign contracts following discovery days, and visits with franchise sales staff that are designed to get them fired up about the opportunity.

  Down the road, those people they dealt with in the beginning will likely move on. The franchisor may even be sold, and new owners and their executives may make changes to the system that require additional franchisee expenditures, or other changes.

  These are long term agreements - 15 to 20 years. The franchisee will be fighting to compete in the marketplace in their line of business. Unfortunately, they may also find themselves in a battle with their own franchisor, which no longer resembles the one they signed their agreement with.

  The franchisee still must pay their franchise fees, and meet all other obligations (including the new ones that may be put in place by new ownership and management), even if these new rules cause their franchise to become unprofitable.

  If a franchisee cannot, or refuses to pay their franchise obligations, and is defaulted by the franchisor, regardless of the changes made by the new management, they are very likely to lose their entire investment, and much more.

• This is the whole issue with joint employer, or the classification as in the case of California AB-5. In words, the franchisors unequivocally claim franchisees are independent businesspeople, yet with many franchises, in their practice, you are what I define as a Franployee. (Franployee - Definition: A person who invests hundreds of thousands of dollars in a franchise, is treated like an employee, pay is not guaranteed, has no rights.) Others have called it indentured servitude. It varies greatly by franchise, and it’s that level of control franchisees need to be concerned about because that is what eats away at any equity in their franchise. 7-Eleven and the janitorial franchises are some of the worst offenders.

• Keith Miller, so are you, like me, now in favour of collective bargaining between franchisors and franchisees?

• Michael (Mike) Webster, I’ve always been in favor of franchisees negotiating with their franchisor, or collectively advocating on franchisee issues. “Collective bargaining” is often used in the union environment, and franchisors love to throw the anti-union sentiment at those words to try to crush franchisees working together. While franchisor groups love to call out franchisees getting together “unionizing”, franchisors band together too, but never use those words. Yes, it’s semantics, but it gets used against franchisees trying to collectively advocate on behalf of their interests.

• Keith Miller It is very difficult for franchisees to see themselves as a collective or needing something similar to a union.

  The instinctive reaction to focus on being independent instead of interdependent.