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The Universal Franchisee Bill of Rights

By Ed Teixeira

At a recent meeting the Coalition of Franchisee Associations ( CFA) ratified the Universal Franchisee Bill of Rights. It’s important that franchisors and franchisees understand what this document states.

Whatever role one plays in the franchise industry it’s important to recognize and be aware of important change. An example of this type of franchise industry change recently took place. On June 22, 2011, the Coalition of Franchisee Associations (CFA) unveiled the Universal Franchisee Bill of Rights during the CFA Day Forum. The CFA’s Fair Franchising Committee presented the document to representatives from CFA member associations and individual franchisees.

The Universal Franchisee Bill of Rights contains a number of key components, including: freedom of association, good faith and fair dealing, full disclosure regarding fees, fair sourcing of goods and services, right to renew the franchise, right to transfer, encroachment, termination rights and fairness in dispute resolution. Only members of boards of directors of franchisee associations can ratify the Universal Franchisee Bill of Rights.

The Coalition of Franchisee Associations Inc. (CFA) is comprised of some of the largest independent franchisee associations. The CFA headquartered in Washington, D.C. states its mission is providing vital support and assistance to the franchisee community. Following are the components of the document:

The Universal Franchisee Bill of Rights

Freedom of Association: A franchisee may freely associate with other franchisees or associations.
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.
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.
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.
Right to Price: A franchisee may establish the price of goods and services it sells.
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.
Right to Renew the Franchise: A franchisee may renew its franchise under terms free of unreasonable costs and or stipulations.
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.
Encroachment: A franchisee shall have specific mar- ket 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.
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.
Default; Franchise Termination Rights: Prior to franchise agreement termination, the franchisee shall be given de tailed 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 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.
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.