AFA - American Franchisee Association

History, Accomplishments, FAQs ...

Who Are We?

The American Franchisee Association (AFA) is a national trade association of franchisees and dealers founded in February 1993. The AFA works to improve the industry of franchising while protecting its members’ economic investments in their businesses.

The AFA advocates for and provides testimony in favor of changing the rules and laws that govern franchising on both the state and federal level. In 1995 the AFA organized its franchisee and dealer membership nationwide, attaining the election of 137 delegates from 27 different chains to attend the White House Conference on Small Business in Washington, DC where franchisee legal issues were among the final 60 recommendations presented to the President and Congress for immediate action.

In 1996 franchisees from 30 different chains worked to develop the AFA’s Model Responsible Franchise Practices Act ("Model Act"). The purpose of the Model Act is to promote the growth of franchising through a uniform set of standards.

Accomplishments (download)

The following is a partial chronology of AFA's accomplishments and activities since 1993 on behalf of franchisees.

AFA’s founding Board of Directors (Feb. 1993) felt that the only permanent manner in which to level the playing field between franchisor and franchisee was to change the rules and laws that govern franchising.
The AFA’s not-for-profit status originally belonged to the National Franchise Association Coalition (NFAC) (est. 1975) and subsequently to the National Alliance of Franchisees and Dealers (NAF&D) (est. 1980). The NAF&D Board of Directors signed over their 501 (c) 6 number to the AFA’s founding Board of Directors by unanimous consent.
AFA’s Board discovered that by educating the press on franchisee issues both the general public and governmental officials gained a better appreciation for the unfair conditions under which many small business franchisees operate. The relationships the AFA has developed with the press over the years means that a more realistic picture of the nature of franchising is now routinely portrayed in the media.
In the 1993-1994 legislative sessions alone franchisee-friendly legislation was introduced in 21 different states. The AFA organized franchisees and testified in 15 of those states (CA, CT, FL, IA, IL, IN, KY, MD, MA, ME, MN, NY, NV, SD, TX).
AFA’s bi-annual Legislative Affairs Days (LAD) held in Washington, DC, every spring and fall, provided Advocacy Training for franchisees, beginning in 1993.
In a 1993 report to Congress, the General Accounting Office found that the FTC began investigations on only 5.7% of the 1,360 complaints it had received over a four-year period and that it closed approximately 40% of those cases without taking any action. The report noted at that time that potentially meritorious cases were not pursued and consequently some victims were not being helped.
In August 1994 the AFA provided testimony before the U.S. House of Representatives Subcommittee on Transportation and Hazardous Materials regarding the Federal Trade Commission’s (FTC) role in the regulation of the franchise industry.
The AFA was actively involved in the Federal Trade Commission’s Franchise Rule review process which began in 1995. The AFA submitted written comments and participated in public workshops in both 1995 and 1996. In 1997 after the FTC published an Advanced Notice of Proposed Rulemaking (ANPR), the AFA submitted written comments along with 70 individual franchisees representing 20 independent associations of franchisees.
The AFA suggested that regional workshops be held in order that franchisees might be better able to have their comments included on the record. The FTC responded to the AFA’s request and held six public workshop conferences in 1997 where the second day was an open forum in which the public was invited to express their views. Franchisees from another 15 independent franchisee associations, all AFA members, participated in these public conferences. In 1999 after the ANPR workshops the FTC published a Notice of Proposed Rulemaking (NPR) to which the AFA again submitted written comments.
At the AFA's request three United States Senators asked the General Accounting Office (GAO) to audit the FTC's enforcement of the franchise rule with a goal of determining what additional congressional oversight is needed in the franchisee-franchisor relationship. The GAO’s audit, entitled, “Federal Trade Commission: Enforcement of the Franchise Rule,” was released to the public on July 31, 2001 (http://www.gao.gov/products/GAO-01-776, GAO Report 01-776). The report showed that 92% of the franchise complaints received by the FTC relate to post-sale relationship problems. The FTC stated in the report that it cannot act on those complaints.
On June 24, 1999, and at the AFA’s request, the House of Representatives held an oversight hearing on franchising, ‘What’s the Beef?’ (American Franchisee Association, Statement of Susan P. Kezios, President, before the U.S. House of Representatives Judiciary Committee Subcommittee on Commercial and Administrative Law).
By 2002 the AFA had convinced the House of Representatives to hold a hearing on the enforcement of the FTC’s Franchise Rule, 23 years after its promulgation (American Franchisee Association, Statement of Susan P. Kezios, president, before the U.S. House of Representatives Subcommittee on Commerce, Trade and Consumer Protection, Committee on Energy and Commerce).
In August of 2004 the FTC issued its Staff Report on the Franchise Rule to which the AFA again submitted written comments. All along the way, the AFA encouraged its member franchisees and Affiliate Member attorneys to participate in the process. Over 60 franchisees from 20 different systems and a dozen franchisee law firms were represented in the Rule re-write process.
The approval and release of the revised FTC Franchise Rule on January 22, 2007, was, in many respects, heavily influenced by the input of the AFA. The AFA was cited 80+ times in the footnotes to the ‘DISCLOSURE REQUIREMENTS AND PROHIBITIONS CONCERNING FRANCHISING - Staff Report to the FTC and Proposed Revised Trade Regulation Rule’ (view report). Changes directly attributable to the AFA include:

1) Gag Clauses: The FTC now requires 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 now requires that franchisors disclose litigation involving predecessor corporations. Second, the FTC requires 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 requires franchisors to disclose pending franchisor-initiated lawsuits against franchisees involving the franchise relationship. (In the past, the FTC Rule required franchisors to disclose only suits that franchisees have filed against the franchisor.)

3 Disclosure of Trademark-Specific Franchisee Associations: The FTC now requires franchisors disclose the existence of trademark-specific franchisee associations. Only those incorporated independent franchisee associations that make their existence known to the franchisor need be included. 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 Rule no longer allows franchisors to disclaim liability for, or cause franchisees to waive their reliance on, statements made in the franchisors’ disclosure documents. The FTC recognized that the use of integration clauses to disclaim liability for required disclosures undermined the very purpose of the Rule, which is to prevent fraud and abuse by ensuring that prospective franchisees have complete, truthful and material information in order to make their investment decision.

The AFA organized franchisees in 32 states to participate in the 1995 White House Conference on Small Business (WHCSB). The AFA succeeded in getting 126 franchisees and 11 franchisee attorneys elected as delegates to the WHCSB.
At the National WHCSB in Washington, DC (June 1995) over 1900 small business delegates from all fifty states—including the 137 AFA delegates--voted on a priority list of small business issues to be presented to the President and Congress for immediate action. Among the final list of sixty priority issues were “franchisee legal and constitutional rights.” For the first time, franchisees were recognized as independent business owners and not merely extensions of their franchisors. The issue of franchisee legal rights is and has been front-and-center in the legislative agenda of the United States Congress since that time.
In the U.S. House of Representatives the AFA coordinated the introduction of the Small Business Franchise Act in both the 105^th and 106^th Congresses (1998 and 1999).
In 1999 the AFA organized the first-ever Franchisee Bar [lawyers]-Regulator Meeting in Chicago which was attended by regulators of 4 registration states plus the Federal Trade Commission and 10 franchisee lawyers from across the country.
The AFA served from 1995-2003 as an advisor to the Franchise Project Advisory Group of the North American Securities Administrators Association (NASAA). AFA’s presence on this Advisory Group helped ensure that any policy decisions effecting franchising made by state regulators would have the input of franchisees.
As a member of the Tax Relief Coalition (TRC) the AFA worked with other business organizations to secure passage of the President's tax relief package. The Job Creation and worker Assistance Act of 2002, signed into law on March 9, 2002, was designed to help the economy recover from the effects of September 11th.
The AFA again provided testimony on June 25, 2002 as franchisees’ advocate at a hearing before the House of Representatives’ Subcommittee on Commerce, Trade and Consumer Protection: “The FTC’s Franchise Rule—23 Years After its Promulgation.”
Sponsor and supporter of California Assembly Bill 2305, ‘The Level Playing Field for Small Businesses Act of 2012’ introduced February 24, 2012, by Assembly Members Jared Huffman and Tom Ammiano.

FAQs

HOW DID THE AFA START?

In September of 1992 the Chair of the U.S. House of Representatives Committee on Small Business held a “franchisee listen-in” to determine the issues and concerns of small business franchisees. (The Committee on Small Business had been holding hearings on franchising for close to two years at the time.)

The leadership of several different franchisee associations traveled to Washington, DC to talk with the Congressman. Susan P. Kezios (pictured above) invited each of the franchisee leaders to a private luncheon and asked the group if they felt the time was right to form a trade association of franchisees and dealers.

The franchisees’ answer was a unanimous, “yes.” Susan promised the group that she would not make an announcement until 5,000 outlets were signed as members of the association. For the next 90 days, she traveled to talk with franchisee association leaders and their boards of directors to encourage their participation in the new association.

In February of 1993, the leadership of a number of independent franchisee associations met with Susan in San Francisco, California for the first organizational meeting of the American Franchisee Association (AFA).

Shortly thereafter, the AFA merged with the National Alliance of Franchisees and Dealers (NAF&D), formerly known as the National Franchise Association Coalition (NFAC), which was originally founded in 1975.

WHAT IS THE PURPOSE OF AFA?

The leadership of the founding association members of the AFA determined that the routine avenues to protecting their business interests were failing them in many cases. A franchisee had two choices at the time: either capitulate to the franchisor’s demands or litigate with them. Neither choice was satisfactory.

The AFA was formed to improve the business conditions for franchising generally, while working diligently to protect the economic interests of franchisees. The AFA accomplishes this goal by providing two additional avenues to resolve potential conflicts. First, the AFA constantly advocates the franchisee’s position. Second, the AFA communicates with federal and state lawmakers about the scarcity of rules/laws governing the franchisor-franchisee relationship.

WHO BELONGS TO THE AFA?

Both independent associations of franchisees as well as individual franchisees belong to the AFA. Association members in the past have include such groups as the Association of Kentucky Fried Chicken Franchisees (AKFCF), the Denny’s Franchisee Association, the Domino’s Franchisee Association (DFA), the Roundtable Owners Association (RTOA), the National Association of Sonic Drive-In Franchisees (NASDIF), Dunkin Donut International Franchise Organization (DDIFO), Independent Hairdo's Franchisee Association (IHFA), Popeye's Independent Franchisee Association (PIFA), the National Coalition of Associations of 7-Eleven Franchisees (NCASEF), the Vision Care Franchisee Association (VCFA), the Asian American Hotel Owners Association (AAHOA), the SUPERCUTS Franchisee Association (SFA), the National Association of Satellite Contract Owners [H & R Block] (NASCO) and the ADDECO Franchisee Association, just to name a few.

WHY WOULDN’T A FRANCHISEE JOIN THE AFA?

There are only two reasons why a franchisee wouldn’t join the AFA. The first is fear of retaliation by the franchisor. Many franchisors use aggressive intimidation tactics to routinely deny their franchisees a basic constitutional right--the freedom of association. Many franchisees decide the internal political pressure from their franchisor outweighs any benefits they may gain from joining the association. Second, some franchisees receive favors from their franchisor in the form of additional locations or other special deals so long as they tow the company line and stay politically correct by not joining a trade association of fellow franchisees.

In order to alleviate both of these problems the AFA developed an anonymous category of membership. Once an individual franchisee or an entire association indicates they want to remain anonymous, neither the public, nor their franchisor will ever be any the wiser. These franchisees realize the value of the AFA and want to do their fair share in supporting the AFA on behalf of franchisees everywhere--they just prefer to do it anonymously.

WHY DO FRANCHISEES NEED THE AFA?

You don’t buy fire insurance when the shop is burning down. The Army, Navy, Air Force and Marines don’t go on extended vacation when the United States in not engaged in direct conflict. The AFA is the best insurance franchisees can buy to ensure that certain franchisors, their attorneys and their lobbyists aren’t the only ones providing input into the rules and laws that govern franchise contracts.

ISN’T THE AFA A "HOTHEAD" ORGANIZATION THAT WORKS TO THE DETRIMENT OF FRANCHISING?

The AFA was founded by successful franchisees who want to continue in the business of franchising. Since its incorporation the AFA has had a membership category for franchisors. There are many franchisors who have no problem with the AFA’s agenda.

Ask the franchisor trade association how long they’ve been in business--since 1960. Then ask them how long franchisees have been allowed as members--since 1993. It took the franchisor trade association decades to welcome franchisees as members--and they did so only in 1993 after the AFA announced its formation. The franchisor trade association brought in franchisees not to protect franchisees’ best interests, but to protect franchisors’ best interests.

ARE THERE AFA EVENTS THAT I CAN ATTEND TO GATHER INFORMATION?

The AFA often sponsors events for franchisees to gather information, make contacts and gain insight. The AFA's Multi-Unit Operators Retreat (MORE) for those franchisees that own twenty franchised units or more. This event is designed for larger, multi-unit operators of franchise systems. Periodically the AFA holds Legislative Affairs Days (LAD) in Washington, DC. These events are designed for franchisees to talk with their Members about issues of importance to small business franchisees.

The AFA also hosts a Franchisee Leadership Summit for the leaders of franchisee associations to come together and discuss issues of importance. AFA’s Franchisee Legal Symposium (also part of the Leadership Conference) is designed to educate franchisees as to their legal and contractual rights.