Government Affairs Summit a Success

Susan P. Kezios, President of the AFA, opened the Summit by saying, “If you buy into the belief that some outsider tells you about the chances of passage of the SBFA--that you don’t have any money, that you don’t have any power—then you will never get the SBFA passed.  However, as a leader of your association, if you put your attention on passing the Small Business Franchise Act and you put your association’s attention on it, we will get what we’re after—baseline standards of conduct for franchisors and franchisees to abide by after the sale.”

 AFA’s lobbyist, Tim Locke, Senior Vice President of the Smith-Free Group in Washington, DC, also addressed the group.  He identified four steps that franchisees must take in order to pass the Small Business Franchise Act.  “We can run circles around our opposition,” he told the leaders in attendance, “provided your organizations do what needs to be done.”

 The AFA’s Government Affairs Summit was possible in part due to the generosity of our two sponsors, Zarco & Pardo, PA and National Franchise Programs Corp.  Robert Salkowski, Partner in the law firm of Zarco and Pardo, presented various sections of the Small Business Franchise Act including the duty of good faith and encroachment.  National Franchise Programs Corp. President Stephen E. McCluckey addressed the group about insurance programs that his firm designs specifically for franchisee associations (see National Franchise Programs’ advertisement on page 3).

 Samuel Crawford, AFA’s Director of Public Policy, conducted a hands-on demonstration on how to use the Internet to contact lawmakers.  He showed the group how to access AFA’s Legislative Action Center (www.franchisee.org), how to e-mail Congresspeople and where to find background information on elected federal officials.

 Another highlight of the Summit was viewing the videotape of the June 24, 1999 hearing before the Judiciary Committee’s Subcommittee on Commercial and Administrative Law in Washington, DC on franchise relationship issues.  Attendees were encouraged by the positive testimony of three members of Congress regarding the need for pro-franchisee legislation.  Participants also learned about the AFA’s Political Action Committee (PAC) and the role PACs play in the legislative process.

 Susan Kezios closed the event by reminding the group that they had three choices:  1) to get what they want—the Small Business Franchise Act passed into law, 2) to get what they don’t want—the status quo, or 3) to get what certain franchisors want for them—arbitrary and unilateral decisions made by the corporations that are often a raw deal for franchisees.  “Obviously,” Susan said, “the first answer is the right choice.” 

 The next Government Affairs Summit is scheduled for Wednesday, February 16, 2000 in Washington, DC.  Private meetings with Congressional representatives and their staffs will also be scheduled for Summit attendees.  Call Samuel Crawford at the AFA for more details (312-431-0545).

Calendar of Events

AFA LOBBYING PROMPTS FTC CHANGES

 Since 1995, the Federal Trade Commission (FTC) has been in the process of amending its Trade Regulation Rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures” (The “Franchise Rule” or “the Rule”).  Since 1994 the AFA has publicly lobbied the FTC for a variety of changes to the Rule.  (The FTC Rule was promulgated in 1979 and was designed to deter fraud and misrepresentation during the pre-sales process of buying a franchise.) 

 While the Rule has little tangible applicability to current franchisees’ relationship issues, the American Franchisee Association (AFA) provided evidence to the FTC regarding a number of abusive practices of certain franchisors during the pre-sales process that cause post-relationship problems between the parties.  The FTC has notified the public that it intends on changing the Rule. The FTC’s proposed changes incorporate a number of items provided by the AFA and its Affiliate Member lawyers to the FTC over the years.

 Proposed changes to the FTC Rule directly attributable to the AFA’s lobbying efforts  include:

 1)  Gag Clauses:  The FTC proposes that franchisors disclose the names of franchisees who are required to sign gag clauses.  These gag clauses are designed to prohibit or restrict existing and former franchisees from discussing with prospective franchisees their experiences, positive or negative, with the franchise system.  (The kinds of gag clauses included for disclosure do not include confidentiality agreements designed to protect a franchisor’s trade secrets and other proprietary information.)

 2)       Litigation:  First, the FTC proposes that franchisors disclose litigation involving predecessor corporations.  Second, the FTC proposes that franchisors disclose civil actions, other than ordinary routine litigation, that may impact upon the franchisor’s financial condition or ability to operate the business.  Third, the FTC proposes requiring franchisors to disclose pending franchisor-initiated lawsuits against franchisees involving the franchise relationship.  (Currently, the FTC Rule requires franchisors to disclose only suits that franchisees have filed against the franchisor.)

 3)      Disclosure of Trademark-Specific Franchisee Associations:  The FTC proposes that franchisors should disclose in their offering circulars the existence of trademark-specific franchisee associations.  The FTC noted that franchisors need disclose only those incorporated independent franchisee associations that make their existence known to the franchisor.  The burden to inform the franchisor of their existence on an annual basis falls on the franchisee association leadership.

 4)      Use of Integration Clauses:  The FTC proposes that franchisors can no longer disclaim liability for, or cause franchisees to waive their reliance on, statements made in the franchisors’ disclosure documents.  The FTC recognizes that the use of integration clauses to disclaim liability for required disclosures undermines the very purpose of the Rule, which is to prevent fraud and abuse by ensuring that prospective franchisees have complete, truthful and material information with which to make a sound investment decision.

A complete copy of the FTC’s proposed changes to the Franchise Rule can be obtained by logging onto the FTC’s web site at www.ftc.gov.  Go to Consumer Protection, then Franchise & Business Opportunities, then Rules & Acts and you’ll see “Regulatory Reform:  Notice of Proposed Rulemaking (Franchise Rule).”    (You will need Adobe Acrobat to download the document.  You can get it for free from the Adobe website.)

YES, I want to fund candidates who support issues important to small business franchisees. I understand that my contribution is not tax deductible and that a corporate check cannot be accepted. You may proceed to our on-line secured contribution form or print and fax/mail our form.

Print to Fax/Mail Form

TOP