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Ask the Experts: Benefits of franchisee associations

Middle Eastern / Western Business People Looking Up At CameraBy Jean-Philippe Turgeon

Q: What are franchisee associations?

Jean-Philippe says:
A franchisee association arises when some or all of the franchisees in a system come together for the purpose of creating a self-supporting organization and allowing members to designate a common voice when dealing with managers at the franchisor level, most commonly in regard to stronger development of the franchise system.

In this context, franchisee associations range from advisory councils to independent groups. The former are often financed by the franchisor, which appoints a limited number of representatives for the franchisees and controls the agenda. The latter associations, on the other hand, are formed and financed by the franchisees themselves, to create their own forum to discuss issues common to all of them. Such associations seek a positive, collaborative relationship with the franchisor, but also provide strong negotiating leverage for each of the franchisees.

While there is no legal definition for a franchisee association, each of the provinces with franchise legislation restrains franchisors from interfering with, penalizing or restricting—by contract or otherwise—franchisees from joining these associations. Franchisors who do so are exposed to damages.

Q: Why are franchisee associations formed?

Jean-Philippe says:
In addition to addressing litigation issues that may result from poor communications between franchisees and franchisors, e.g. by helping franchisees leverage their bargaining power against their franchisor and to share the costs of such disputes, a well-organized franchisee association is usually intended to prevent conflicts in the first place, by expressing collective interests in a constructive manner. Franchisee associations often raise and discuss such matters with franchisors as non-competitive supply costs, deficient marketing strategies, lack of operational supervision and threats to system-wide standardization.

Some franchisors fear these associations, but others see them as constructive and useful for collecting and conveying information across the franchise system.

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