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Coalition of Franchisee Associations Supports the Protect Florida Small Business Act

As an advocate for small businesses, the Coalition of Franchisee Associations (CFA) is pleased to announce its support of pro-franchisee legislation unveiled today for the upcoming Florida legislative session. Sponsored by state Sen. Jack Latvala (R-16) and Rep. Jason Brodeur (R-28), the Protect Florida Small Business Act will level the playing field for owners of franchised small businesses and provide legal protections that will lead to more economic growth and jobs in communities across the state.

“CFA applauds Sen. Latvala and Rep. Brodeur for their introduction of the Protect Florida Small Business Act. Franchise owners in Florida invest, employ and pay taxes in their communities. Increasing the protections for these local businesspeople creates an environment that gives incentive for future investments,” CFA Chairman Keith Miller said.

“More than 400,000 jobs in Florida are directly tied to the hard work and efforts of franchised small-business owners,” explained Latvala. “Currently these small businessmen and women have no real protection if the national corporation drops them as a franchise holder. This is not a level playing field, this is wrong, and it must change.”

If enacted, the Protect Florida Small Business Act will provide additional safeguards for franchisees, including protecting against unjust terminations, unfair restrictions on sales and transfers and unsubstantiated non-renewal of franchise agreements.

“As a legislator, I want to continue to make sure Florida has the most business-friendly climate in America. As a chamber of commerce president, I’m particularly sensitive to the threats against small-business owners from out-of-state companies,” said Brodeur. “I want to be sure that there is a level playing field for all business owners in Florida, whether they are a small independent shop or a franchisee.”

For more information on the Protect Florida Small Business Act, visit www.protectFLbusiness.com.

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CFA Opposes Joint Employer While Addressing Franchisor Control

On July 29, 2014, the National Labor Relations Board (NLRB) issued an Advice Memorandum (“memo”) which would greatly expand liability for franchisees across the country. The memo creates an expanded definition of the joint employer standard and directs administrative law judges to hold franchisors and franchisees jointly liable in a greater number of labor-related cases.

The previous standard on determining joint-employer status — which has been in place for 30 years—recognizes separate business entities as joint employers if they “share or codetermine matters governing the essential terms and conditions of employment…[meaning] matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.” The NLRB, however, has imposed a new, broader standard that would result in a joint employer finding whenever “industrial realities” make an entity essential for meaningful bargaining.

The Coalition of Franchisee Associations (CFA) opposes the NLRB’s new joint employer definition. Expanding liability eliminates the ability of franchisees to operate independently and act in the best interests of their employees and customers. With the threat of increased liability, franchisors will exert even greater control over franchisees and reduce the franchisees’ role to that of glorified managers. Further, in order to protect the brand and support franchisees with more staff and resources, franchisors are conducting massive brand consolidation and eliminating the single store operator.

CFA is also concerned about the legal implications of this new standard on franchisee liability. Most, if not all, franchise agreements include an indemnification clause that absolves the franchisor of liability against lawsuits arising out of a franchisees’ business operations. Therefore, regardless of increased franchisor liability arising out of the new joint employer standard, franchisees will still be held solely liable for labor-related claims, which will no doubt increase due to an influx of lawsuits by those seeking compensation from the “deeper pockets” of franchisors. The result is an increase in franchisee liability as well as franchisor control – a lose-lose for franchisees.

The clearly stated purpose of the new joint employer doctrine in the franchise space is to unionize an entire franchise system’s employees of its numerous independent franchise owners. It seeks to accomplish this by forcing a franchisor to negotiate a collective bargaining agreement covering its entire system. CFA vehemently opposes any situation where a franchise owner is obligated under a contract negotiated by another party, particularly in systems where franchises are not operated by the franchisor negotiating the agreement. Such a franchisor will have few, if any, of the burdens of the employer who was frozen out of the negotiation and will have none of the costs. As discussed above, CFA’s franchise owners sign agreements which require them to indemnify any such cost borne by a franchisor in addition to their existing obligations to their employees.

While CFA opposes the new joint employer standard generally, it acknowledges the need to protect franchisees from franchisor control, overreach and the ultimate goal of unionization. In order to promote good faith and fair dealing, CFA supports increased franchisee protections in the areas of disclosure, transfer/renewal/termination rights, pricing, sourcing and encroachment, among others. We urge the franchisor community to support and adopt the principles as set forth in the Uniform Franchisee Bill of Rights as well as in federal, state and local franchisee rights legislation.

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The Culture of Communication: Maintaining Company Culture with Multiunit Operations and Cross-State Companies

By Kristen Perez

As business owners, there are a multitude of aspects to concentrate on concerning of your employees. We all try to be diligent in our efforts to keep employee well-being a priority, as retention of top talent translates to the overall well-being of the company itself. From the efficiency of operations to maintaining a union-free environment; their satisfaction within the company cannot be overlooked. Oftentimes the main indicator or source of employee satisfaction within the company comes directly from the company culture itself.

However, when your company is expanding or you find that your locations are geographically widespread, maintaining company culture is no longer as simple as it once was when operating one or two locations. This is why it is important to dedicate thought and time into implementing a sophisticated company culture system within your network.

Too often do we presume that company culture is created by the mission, environment and personality of the company. These factors do effect culture, however, they do not solely create it. There is far more to culture and its maintenance than these aspects can account for, especially in large multiunit or geographically widespread operations. The key is to create and implement a system that will translate whether you have one location or hundreds. This can be accomplished by changing your thought on where company culture comes from which is simply: communication. The culture of a company is an evolving quality of the practices and styles utilized by your company in its communication tactics. By designing your culture of communication you can keep the culture you love as you grow.

Begin with the end in mind. There are a multitude of organizational cultures to sort through and it’s imperative that you acquaint yourself with the varying types of elements. Once acquainted, you must then determine what type of cultural element you desire most for your company. Is ‘transparency’ most important to you? Or is a ‘teamwork culture’ your ideal? First, define what type of element you see as the most beneficial to your company’s health and longevity. This will impact several factors for how you go about creating your culture as each trait caters to certain characteristics over others. If it is transparency that you are aiming for, your leaders must always be transparent as well, even if it means delivering less than desirable news. If it is a teamwork value that you wish for your culture to adhere to, everyone — from the hourly employees to your executive team — must be able to work congruently and smoothly as a unit and embrace group activities.

Foster Culturally-Focused Leaders. Once you have decided upon what type of cultural element you wish to centralize your company’s culture around, assign a representative who is implicitly involved with the general staff or structure to be directly responsible for culture. Assign someone who is responsible for hiring candidates or managing the team to set their priorities on maintaining culture simultaneously. As for the remainder of your leadership team, make sure they too embody the type of culture you desire. Their influence within the organization will directly impact the company’s culture, for when leaders act, employees view that as the accepted and desired action.

Organizational Structure Drives Culture. Ensure that the hierarchical structure of your company allows for the type of communication that your ideal culture fosters. If your goal was to implement a transparent company, allow for transparent communication between each rank, such as with feedback. This can be accomplished through channels such as a suggestion box or a companywide survey. However, employees will only feel compelled to provide their real feedback if they feel it is safe to do so and if the possible changes are genuinely considered.

If a team environment is your goal, create a structure that includes group activities. This can be done by incorporating quarterly or monthly office outings that are engaging and allow people to enjoy themselves as coworkers and people. Be creative with these outings and mix them up so that every type of personality will enjoy something and not expect the same event each time. Monotony is the enemy of excitement and you want your employees to be excited about work outings if a team atmosphere is your goal.

Continuously communicate. As culture is dynamic in nature, it is also prone to adaptation, or in the case of diverting further from your original goal: mutation. To protect the integrity of your company’s culture you must fight against the natural phenomena of mutation in your culture. By continuously reinforcing your ideals through constant communication and instilling proper “check lists” as part of your routine, you can protect your company’s ideal culture from such deterioration.

Company culture is a multifaceted and dynamic entity in an organization. However, as your company grows, it is a crucial element that will guide employees to act or behave in certain ways, even in times of uncertainty. It is the element that employees will not only carry within their day-to-day work demeanor, but will also project onto new employees or those outside of work. As such, your culture must be deeply rooted into the structure of your organization and cannot simply be empty words on a mission statement. With its integrity intact, culture can provide the framework that propels your company’s success, whether you operate a single location or a hundred.

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Universal Franchisee Bill of Rights

Franchising is one of the most powerful brand building tools ever created. It is reported that franchising is responsible for 760,000 businesses, 18 million jobs, 14 percent of the private sector employment, and over $500 billion in payroll. Total sales by businesses operated by franchisees are projected to reach over $2 trillion this year. 1 out of every 12 businesses is independently owned and operated by a franchisee¹.

Over the last 50 years, franchisees have invested their capital and hard work in creating some of the most recognized brands in the marketplace. The success of franchising is predicated on the investment by franchisees. This is now at risk because the terms of the franchise agreements have become more one-sided in favor of the franchisors. They have significantly reduced the ability of franchisees to build their businesses and serve their customers.

This Universal Franchisee Bill of Rights² is a fairness doctrine. It has been developed by franchisees in multiple systems and industries to identify the basic terms of fairness that are missing in their franchise agreements, and must be restored to ensure the success and growth of the franchise systems.

1. Freedom of Association: A franchisee may freely associate with other franchisees or associations.

2. Good Faith and Fair Dealing: A franchisee may rely on a franchisor’s good faith, fairness, exercise of due care, and performance including the administration of; advertising, rewards programs, marketing funds, and franchise or development agreements.

3. Uniform Application of Brand Standards: Franchisors shall maintain consistent operating standards under a specific franchise system brand name and uniformly apply such standards in a non-discriminatory manner.

4. Full Disclosure Regarding Fees Collected From Franchisees: A franchisor shall make available to the franchisee all records of marketing, rewards programs, and related fees that have been paid by franchisees, vendors, suppliers, and licensees.

5. Right to Price: A franchisee may establish the price of goods and services it sells. 6. Fair Sourcing of Goods and Services: A franchisee, or franchisee purchasing cooperative, may purchase, from any vendor, goods and services that meet the formally established standards of the franchisor. 7. Right to Renew the Franchise: A franchisee may renew its franchise under terms free of unreasonable costs and or stipulations.

8. Right to Transfer: A franchisee shall have a right to transfer its franchise to a qualified purchaser, including, but not limited to, family members or business partners, without unreasonable costs, stipulations or penalties.

9. Encroachment: A franchisee shall have specific market protection wherein the franchisor shall not materially impact the franchisee’s business, or allow another entity with the same or a similar brand to operate.

10. Ample Notice of Significant Change; Franchisee Termination Rights: Notice of significant change to the franchise system shall be given in a reasonable time prior to required changes. A franchisee may terminate without penalty, or liquidated damages, if a change to the franchise system would cause substantial negative impact or if the franchisee is experiencing substantial financial hardship. Under such termination any non-competition covenant shall be void.

11. Default; Franchise Termination Rights: Prior to franchise agreement termination, the franchisee shall be given detailed reasons for alleged default and reasonable time to cure. Termination shall not occur without good cause, and termination shall not compel payments of liquidated damages, and or early termination fees. All franchise agreement rights shall remain in full effect for any franchisee not in default or that cured a default. A default under one franchise agreement shall not constitute a default under a different franchise agreement.

12. Fairness in Dispute Resolution: A franchisee may elect to have all dispute resolution proceedings and legal action occur in the local venue of the franchisee and shall not be required to submit to mandatory binding arbitration.

13. Equity and Property Rights: A franchisee has equity in their business, has made a substantial investment in their business and shall have the right to monetize that equity and investment prior to the expiration or termination of the franchise.

1. “The Economic Impact of Franchised Businesses: Volume III, Results for 2007”,  International Franchise Association Educational Foundation
2. The “Universal Franchisee Bill of Rights” is a hybrid compilation from significant work that has been done by the AAFD, AAHOA, AFA, CFA Fair Franchising Committee, individuals from those prominent organizations, and other friends and supporters of franchisees. It is the intent that we create a “Universal Franchisee Bill of Rights” that no one organization can claim as their own, but members of the greater franchise community can endorse.

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Click here to download a copy of the Universal Franchisee Bill of Rights