There has always been a fine line between policing franchisors and discouraging the creation of franchise businesses. While no one wants to promote practices that could potentially abuse franchise formations, a body of law should not be so strict as to make creating a new business prohibitive. In 2007, the American Association of Franchisees and Dealers (AAFD), a non-profit trade association was formed in order to limit franchise fraud and simultaneously encourage franchise business formation. The agency seeks to find a balance between franchise crushing business regulations and over-selling and misrepresentation by franchise salespeople to prospective investors. The association defines and promotes the “best practices” guidelines that franchises are expected to follow and seeks to level the playing field from franchisor to franchisor with standards that apply to all.
When a client is looking into purchasing a franchise, one of the first websites they should visit is the AAFD’s site at https://www.aafd.org/. There you can have a look at the “Franchisee’s Bill of Rights” a list of critical contractual protections that a franchisee can expect in the franchisee/franchisor relationship. Each of these 15 items will give you a framework in your negotiations with the franchisor. A franchisee has the right to expect market protection, the right to stay in the same business should the franchise agreement be terminated, and the right to the loyalty of the franchisor, just a few of the fifteen essential rights that a franchisee can expect.
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