The Small Business Franchise Act
The Small Business Franchise Act
Michigan congressman John Conyers, Jr. stated that “Protecting the rights of franchisees is ultimately about protecting the rights of small businesses.”
The proof is in the details:
1) The bill reinforces existing prohibitions. The SBFA is a reminder that perpetuating fraud within the franchisor-franchisee relationship is prohibited.
2) The bill mandates good behavior and faith. Unsurprisingly, not everyone follows the rules in the world of franchising. The SBFA looks out for small franchisees by requiring all parties to act honestly with each other and observe reasonable standards of fair dealing in the industry.
3) The bill encourages franchisees to form trade associations. The SBFA clearly states that corporations cannot prevent franchisees from creating or joining trade associations. (As a matter of fact, membership in professional organizations is beneficial, and can enhance one's knowledge of the franchising world).
4) The bill protects the franchise from unjust termination. A compulsory 30-day period must be given to the franchisee to cure any defaults, among other allowances.
5) The bill promotes free trade post franchise agreement expiration. Upon franchise agreement expiration, a former franchisee is allowed to engage in business anywhere but is prohibited from using the franchisor's trademark, intellectual property, or trade secrets.
6) The bill protects franchisees against unlawful transfer of the business. Franchisees are particularly vulnerable to unlawful transfers due to the prevalence of mergers, leveraged buyouts and acquisitions. According to the SBFA, franchisees must be given 30 day's notice of the franchisor's transfer of ownership to another entity.
7) The bill gives a state attorney general permission to step in if necessary. Should a state attorney general believe that the interests of the state have been or are being adversely affected or threatened due to franchisor activities that violate the SBFA, the attorney general is allowed to bring a civil action on behalf of its residents in a U.S. District Court. In other words, the highest prosecutorial officer of the state can make sure that the SBFA is not being violated.
8) The bill allows franchisees the freedom to independently source goods and services. Rather than forcing franchisees to purchase materials from corporate headquarters at what can be an exorbitant price, the SBFA allows franchisees to purchase goods and services from sources of their own choosing (given that those materials meet reasonable, established and uniform system-wide quality standards dictated by the franchisor).
9) The bill imposes limited fiduciary duty on the franchisor. When handling the small businessperson's money, the franchisor must provide its franchisees with the highest standard of care. Franchisors are obligated by the SBFA to give franchisees a full disclosure of disbursements and a full accounting of how the money is being used.
10) The bill enforces procedural fairness. It is unlawful for a franchisor to require any term/condition in the franchise agreement that violates the SBFA. This is very important, as it disallows a franchisor from restricting any benefits inherent in the SBFA.
The Small Business Franchise Act - To learn more about this author, visit Sebastien Page's Website.
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Originally introduced in 1998 and passed in 1999, the Small Business Franchise Act (SBFA) is has put into place certain safeguards designed to eliminate fraud and other activities that might exploit franchisee investors. Common opinion holds that the SBFA was introduced in order to give franchisees additional bargaining power against franchisors.
Michigan congressman John Conyers, Jr. stated that “Protecting the rights of franchisees is ultimately about protecting the rights of small businesses.”
The proof is in the details:
1) The bill reinforces existing prohibitions. The SBFA is a reminder that perpetuating fraud within the franchisor-franchisee relationship is prohibited.
2) The bill mandates good behavior and faith. Unsurprisingly, not everyone follows the rules in the world of franchising. The SBFA looks out for small franchisees by requiring all parties to act honestly with each other and observe reasonable standards of fair dealing in the industry.
3) The bill encourages franchisees to form trade associations. The SBFA clearly states that corporations cannot prevent franchisees from creating or joining trade associations. (As a matter of fact, membership in professional organizations is beneficial, and can enhance one's knowledge of the franchising world).
4) The bill protects the franchise from unjust termination. A compulsory 30-day period must be given to the franchisee to cure any defaults, among other allowances.
5) The bill promotes free trade post franchise agreement expiration. Upon franchise agreement expiration, a former franchisee is allowed to engage in business anywhere but is prohibited from using the franchisor's trademark, intellectual property, or trade secrets.
6) The bill protects franchisees against unlawful transfer of the business. Franchisees are particularly vulnerable to unlawful transfers due to the prevalence of mergers, leveraged buyouts and acquisitions. According to the SBFA, franchisees must be given 30 day's notice of the franchisor's transfer of ownership to another entity.
7) The bill gives a state attorney general permission to step in if necessary. Should a state attorney general believe that the interests of the state have been or are being adversely affected or threatened due to franchisor activities that violate the SBFA, the attorney general is allowed to bring a civil action on behalf of its residents in a U.S. District Court. In other words, the highest prosecutorial officer of the state can make sure that the SBFA is not being violated.
8) The bill allows franchisees the freedom to independently source goods and services. Rather than forcing franchisees to purchase materials from corporate headquarters at what can be an exorbitant price, the SBFA allows franchisees to purchase goods and services from sources of their own choosing (given that those materials meet reasonable, established and uniform system-wide quality standards dictated by the franchisor).
9) The bill imposes limited fiduciary duty on the franchisor. When handling the small businessperson's money, the franchisor must provide its franchisees with the highest standard of care. Franchisors are obligated by the SBFA to give franchisees a full disclosure of disbursements and a full accounting of how the money is being used.
10) The bill enforces procedural fairness. It is unlawful for a franchisor to require any term/condition in the franchise agreement that violates the SBFA. This is very important, as it disallows a franchisor from restricting any benefits inherent in the SBFA.
The Small Business Franchise Act - To learn more about this author, visit Sebastien Page's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
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