Franchise Outlook

Franchisee Fairness Bill Bad for Franchisees?

businessman2A change may seem like a good thing… until you examine it more closely.

So it is with California’s “Franchise Bill of Rights,” vetoed by the governor least year but back again. The CEO of Carl’s Jr., Andrew Puzder, wrote a letter to the editor of the Orange County Register pointing out the other side of the story.

Assembly Bill 525 limits the ability of a franchisor to end the relationship with a franchisee. Among other things, the franchisor has to give the franchisee 60 days to “cure” the problem or problems identified in the franchise.

Puzder asked Orange County Record readers to imagine that they are franhisees with a company like Carl’s Jr.

With a lot of hard work and care, your business is thriving.

Then, you start hearing about a nearby franchisee trying to squeeze extra dollars out of the business by underportioning orders to reduce food costs. As a result, customers are getting less than they pay for. Or, this franchisee may be understaffing the restaurant to save on labor costs, resulting in a dirty restaurant with slow or unfriendly service.

This franchisee is damaging consumers’ perceptions of the brand in which you’ve invested your time and savings. The only place you can look for protection is your franchisor. After all, it’s the franchisor’s job to protect the brand’s image.

Puzder points out that even if the franchisor immediately responds to franchisee concerns and takes action, there will still be at least 60 days during which the franchisee who is bending the rules can continue to do so, damaging the brand on which the successful franchisee relies.

” As the case meanders through the judicial maze,” says Puzdar, “the brand’s reputation for food quality, good service and cleanliness would continue to decline, damaging the entire franchise system.”

Puzdar also makes the common-sense point that franchisors aren’t out to get rid of successful franchisees — they’re working to increase the number of franchisees and to help them succeed.

Not everyone agrees. The Los Angeles Sentinel said, “Franchisees in California are one step closer to being treated as the small business owners that they are, and not employees.” Organizers working toward a higher minimum wage for fast food workers hope that the law will help them get franchisees on their side, or at least keep franchisees from siding with their corporate franchise partners.

Puzder’s letter began and ended with the claim that there really isn’t a problem for the California legislature to solve. Franchisors don’t end franchise relationships willy-nilly, and most franchisees are happy. Those who aren’t happy, or who are damaging the brand, should lose their franchises.

And franchisees generally are happy. Franchise Business Review recently did a survey of 25,000 franchisees and found that 80.7% are satisfied with their franchises. 88.7% enjoy operating their businesses and 84% respect their franchisors.

Respondents from the food service industry were slightly less happy, with 77.1% describing themselves as satisfied, but 87.6% enjoy operating their businesses.

A survey of American employees found that only 52.3% said they were happy with their jobs (the survey did not separate out franchises from other kinds of businesses, but spoke only with employees, not owners of businesses). Business owners are generally happier, so this may be about owning a business rather than franchising in particular. However, it certainly does not support the image of unhappy franchisees suffering from abuse by their franchisors.

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