Inequality is built into franchising. The franchisor owns the trademarks and the system, writes the contracts, enforces their terms, and chooses the franchisees. Trademark owners are required to maintain a certain amount of control in order to ensure the validity of their trademarks. However, franchise agreements tend to be far more one-sided and controlling than the minimum required to protect the trademarks. In practice, franchise agreements tend to impose far more requirements on the franchisee than on the franchisor; often, other than agreeing to license the system and provide a copy of the operating manual, the franchisor has no firm obligations, but can decide whether or not to act with regard to advertising, training, system development and franchisee support.
Also built into franchising is a community with common interests - the franchisees. Franchisees can gain substantial benefits from participation in an independent franchisee association. Instead of facing your franchisor alone, you can obtain strength by coming together and negotiating with your franchisor collectively. Franchisee associations have achieved improvements in the fairness of future franchise agreements, and gained a voice in their systems’ advertising and product choice decisions. Some very large associations hold annual conventions which system vendors and the franchisor pay to attend.
In systems where the franchisor does not provide such services, franchisee associations can operate purchasing programs to negotiate discounts for members, and collect and disseminate operating advice and best practices to help their members improve their franchises’ performance.
In California, Corporations Code Section 31220 gives franchisees the right to freely associate, and makes it illegal for a franchisor to interfere with the franchisees’ association. A few other states have similar statutes. Our firm assists and advises franchisees who wish to form and incorporate a franchisee association, and advise and represent franchisee associations in negotiations and litigation. We advise franchisee groups on issues and challenges facing their franchise systems, franchise agreement terms, and the franchise relationship.