In This Issue of AFA's Blast Fax
Representing the interests of small business franchisees nationally.

July 2000

AFA PROMPTS SENATE REQUEST FOR FTC AUDIT

On June 27, 2000, three United States Senators sent a letter to the Comptroller General of the United States requesting an audit of the Federal Trade Commission�s (FTC) Franchise Rule formally titled, �Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures.� 

Senators Thad Cochran (R-MS), Charles Grassley (R-IA) and Susan Collins (R-ME) have asked the Comptroller General to follow-up on a July 1993 GAO audit of the FTC.  Senator Collins Chairs the Senate Government Affairs� Permanent Subcommittee on Investigations.  Senator Grassley chairs the Senate Judiciary Committee�s Subcommittee on Administrative Oversight and the Courts. 

The July 1993 audit of the FTC�s enforcement of the Franchise Rule found that the FTC acted on less than 6% of all franchise complaints brought to it and took just 2% of those complaints to federal court.  No distinction was made between franchise cases and business opportunity cases in the 1993 audit. 

The June 27, 2000 letter to the Comptroller General specifically asks the GAO to distinguish between complaints concerning franchises from those involving business opportunities.  It further asks the GAO to distinguish between those franchise complaints that involve pre-sale disclosure issues versus post-sale relationship issues, and to categorize the complaints received. 

Over the years the AFA has urged the FTC to investigate the post-sale business practices of certain franchisors.  While the FTC promotes the use of pre-sale disclosure documents in the franchise sales process it refuses to become involved in and has been totally ineffective in promoting fairness and free competition in the franchise relationship.  FTC staff has routinely stated over the years that they lack enough resources to act on all meritorious franchise complaints.  FTC staff has further stated that they have very limited jurisdiction with regard to post-sale bad faith business practices of certain franchisors. 

The AFA believes that once the GAO acts on the Senators� request, new data will be available to demonstrate the need for additional Congressional oversight in franchise relationships similar to the baseline standards of conduct sought by Congressmen Howard Coble (R-NC) and John Conyers (D-MI) in HR 3308, the Small Business Franchise Act.  

Actions of the AFA Board of Directors

The Board of Directors of the American Franchisee Association (AFA) met in Chicago, Illinois on June 23, 2000 to conduct the business of the association.  Among other items, the Board passed the following three resolutions  

Dues Structure for Individuals & Associations

The AFA Board of Directors reaffirmed the current dues structure for individual and association members.  Individual members of the AFA will continue to pay the previously established dues rate of $100 per franchised outlet per year.  This amount is capped at $2,500.  For example, if an individual owns three franchised outlets, he/she would pay $300 per year in dues to the AFA.  If an individual owns 25 franchised outlets, he/she would pay $2,500 per year in dues to the AFA.  If an individual owns 26 or more franchised outlets, that individual would not pay more than $2,500 per year. 

Association members of the AFA will continue to pay $25 per franchised outlet.   For example, an association comprised of 300 franchised outlets pays $7,500 in dues per year.  There is, however, a minimum amount required of association members.  The minimum amount required is $2,500.  For example, an association comprised of 50 franchised outlets would pay a minimum of $2,500 in dues instead of $1,250 (50 outlets X $25).

Association member dues are capped at $60,000.  An association comprised of 2,400 franchised outlets will pay $60,000 in dues per year (2400 X $25).  However, with the cap, an association comprised of 4,000 franchised outlets will also pay $60,000 in dues (instead of $100,000).

Affiliate Dues

The AFA Board of Directors voted for the first time since the AFA�s inception to increase Affiliate Member Dues from $1,200 to $1,500 per year beginning October 1, 2000.  Principals and/or partners who desire a primary listing will pay $1,500.  A secondary membership for associates was established at $750.  Associates at law firms cannot purchase secondary memberships if there is no primary membership listing.  In this example an associate would pay the primary listing rate of $1,500.

WELCOME NEW AFFILIATE MEMBERS 

We are happy to welcome the following three new Affiliate Members to the American Franchisee Association 

JOHN J. ALLAN
Law Offices of John J. Allan, P.C.
Clayton, MO 

John Allan has been practicing entrepreneurial law since 1974, specializing in franchising, small business development and professional negligence litigation.  His law firm has represented clients in the following franchise systems: Meineke Muffler, Subway Sandwich, Inches-A-Weigh, Domino�s, Auto Artistry and Sparks Tune-Up.  John was also the legal counsel to One Way Pizza, Inc., an area Domino�s franchisee, from 1985-1989.           

John is a past chair of the Franchise Law Committee for the Bar Association of Metropolitan St. Louis. 

You can contact John by calling 314-725-4545. 

LAWRENCE ASHE
Zack Kosnitzky, P.A.
Miami, FL 

            Larry Ashe has been litigating cases in the areas of franchising, distribution, franchisee/franchisor relationship matters and contract disputes for the past nine years.  He has represented franchisees from a wide variety of chains including McDonald�s, Burger King, Dunkin� Donuts, 7-Eleven, Kentucky Friend Chicken, Wendy�s, Taco Bell, T.C.B.Y., Blimpie�s, Denny�s, Baskin Robbins, Popeye�s, Mobil Oil, Comfort Inn and Little Ceasar�s Pizza. 

            Larry currently serves as a Steering Committee Member for the AFA�s Franchisee Legal Symposium.  He obtained an MBA in Economics from George Washington University prior to practicing law. 

Contact Larry at 305-539-8400. 

RICHARD ORDER
Updike, Kelly & Spellacy, P.C.
Hartford, CT 

Richard Order�s law experience has been in representing franchisees in litigation and negotiation, with an emphasis on commercial disputes.  He recently completed a three-year term as Chairman of the Federal Practice Section of the Connecticut Bar Association where most of the franchise disputes in Connecticut are litigated.   Richard has also served on the Executive Committee of the franchise Law Section of the Connecticut Bar Association.   

  Richard�s has represented clients from the following systems: Cummins Engine Company, Surface Doctor, Travel Centers of America, Howard Johnson�s and Advantage Payroll Services. 

You can contact Richard Order by calling 860-548-2659. 

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