Franchising World July 2008

The overall goal of a Franchise Advisory Council is to facilitate communication between franchisor and franchisee and provide a platform for the sharing of ideas and implementation of ways to maximize profits for both parties.

By Janice M. Dwyer, CFE

In 1993 during the International Franchise Association’s annual convention held at the San Francisco Hilton, a group of franchisees, designated by their franchise systems met, with leaders of the association in an organizational meeting of the first IFA Franchise Advisory Council. 
 
Chuck Sternod, a franchisee of Mr. Rooter, recalled the IFA board of directors created the FAC to provide recommendations to the board about ways to improve communications between franchisors and franchisees.  Until then, communication and conflict resolutions between franchisor and franchisee had been rudimentary at best. 

The first council participants were leaders laying a path for others to follow.  They understood the need for the encouragement of meaningful dialogue between franchisee and franchisor and recognized a FAC would be instrumental in addressing and resolving concerns of mutual interest before they developed into major issues. The first chairperson, Regina Gardner, UNIGLOBE Dynamic Travel, Inc. said, “We are making history, and I am honored to serve with a group which has shown strength, commitment and a genuine desire to move toward a common goal, that of bridging the gap between franchisor and franchisee in an effort to create a better world with ample opportunity for all of us.” 

Just how valuable was the input of the original IFA FAC committee?  Founding participants went on to offer invaluable contributions to the association.  Original participants included Steve Siegel, managing partner of Brookside Consulting; and Lawrence “Doc” Cohen, CFE, president of Doc & Associates, Ltd., a franchisee of the Great American Cookie Co., The Coffee Beanery and Pretzel Time; who later became chairmen of the association.  Harman Management Corp. Exec. Vice Chairwoman Jackie Trujillo, CFE; Tasti D-Lite Vice Pres. of Franchise Development Nikki Sells, CFE;  and Gardner were awarded the prestigious “Bonny Levine” award, in part, for their efforts. The contribution from this original committee and subsequent contributors has been invaluable to the franchising community as a whole. 
 
Any franchise system would be ill-advised if it did not plan to establish a FAC very early in its growth. An FAC created jointly by the franchisor and franchisees is the most productive.  Otherwise, franchisees may be reluctant and less accepting of an FAC created entirely by the franchisor.  An FAC created solely by franchisees may not involve the franchisor as much, and instead be more akin to an association.

A franchisor should make provisions for the formation of a FAC in the franchise agreement and draft the constitution and rules in its operations manual.  By doing so, all franchisees will know the objectives and working methods of the FAC have been conceived with the best intentions in mind.  The FAC bylaws should include eligibility, termination, hierarchy designations and roles.

Bylaws are the first step in the organization of a FAC. They are the ground rules: name of the council, its purpose, organization and operating procedures. Bylaws can be either basic or complex and are generally written in concise legal language and cover every possibility which could arise in the dealings of the council.  The bylaws need to be clearly stated so everyone involved has similar expectations.  They should cover everything from the purpose of the FAC, who belongs and how are they elected and appointed, to when and where meetings are held, and who pays the expenses. 

For an FAC to be successful, its bylaws should provide a specific objective or purpose.  While the basic purpose is improving communication between franchisor and franchisee, broader objectives may be included depending on the intricacies of the system.  For example, broader objectives may include the generation of promotional ideas, or ensuring the maintenance of high standards and business practices throughout the system. In the end, it is the franchisor and franchisees forming the council who determine the FAC’s purpose.
 
Representation is the next issue concerning council formation.  Who can belong and for how long? Who conducts the meetings and where? How are members selected or appointed?  Most often franchisee members are elected by their peers.  Striking a balance between adequate representations of all franchisee owners and forming a group that is not so large that it will be unmanageable is the main goal.  Members should include a mix of both new and experienced single-unit and multi-unit franchisees, and a regional mix of owners. 

Standing committees within an FAC are formed to contemplate several issues such as operations, technology, services, marketing and finance.  A committee is created to examine a specific issue, initiative or problem, produce possible solutions and present them to the council.  Committees determine which issues are of importance and whether the item belongs on the agenda of the council. 

Do’s and Don’ts in FAC Organization Continuity
• Stagger the terms of office for council members,
• Restrict FAC representatives to hold no more than two terms consecutively,
• Conduct a mid-term election if a member must leave his post,
• Perform new-member orientation,
• Restrict travel to non-exotic locations for FAC meetings,
• Limit the number of franchisees represented by each member to 50,
• Create regions for representation,
• Circulate an agenda in advance of the meeting,
• Outline topics to be covered and ask for input,
• Record detailed minutes of each meeting,
• Distribute minutes to each council member,
• Begin each meeting by reviewing the code of conduct,
• Leave each meeting with specific plans and a timetable, so each member knows his responsibilities,
• Require FAC members to sign a confidentiality agreement, and
• Use the FAC as one of the many ways to communicate.
 
FAC expenses are handled in a variety of ways.  Expenses from some councils are paid exclusively by the franchisor, some by fixed fees levied on all franchisees, and some by a combination thereof. More commonly, however, a council member pays his own expenses, while the franchisor generally provides a meeting facility, and use of a secretarial staff for administrative work. Nevertheless, how expenses are paid should be clearly defined in the bylaws and explained before all elections.  When the expenses are paid from a marketing fund, they should be disclosed to all franchisees.

An FAC is a benefit to both the franchisor and the franchisee.  Good relationships, respect and trust cannot be put into a contract or legislated; these are things that grow through time. The overall goal of a FAC is to facilitate communication between franchisor and franchisee and provide a platform for the sharing of ideas and implementation of ways to maximize profits for both parties.
 
A franchise system will be more successful obtaining endorsement and implementation of new ideas or changes, when those ideas are presented through the FAC, especially, if the new idea or change is necessary but disagreeable. Intractable franchisees may be more willing to accept those changes as a result of peer pressure, rather than the franchisor flexing its muscle and falling back on its legal rights to enforce its contracts.   
 
Finally, a franchisor establishes an FAC with the goal of increasing communication and consultation.  The FAC can also promote energies and ideas of franchisees for the common good.  The sharing of ideas is one of the greatest features of a franchise system; each franchisee works independently, but with the common goal of the entire system succeeding.  Many improvements to the franchise system’s services or products originate from the franchisees.  Through communication franchisees have at times solved problems or issues the franchisor may have struggled with for years, thereby improving the way in which the franchise system operates.  The FAC plays a vital role in the success of any franchise system.  

Janice M. Dwyer, CFE, is president of the Affinity Group Division of the insurance firm Luce, Smith & Scott Inc.  She can be reached at 800-642-8338 or 440-746-9110.  

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