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Should You Allow Franchisees Who Are Connected to Your Franchisor to Join Your Association?

Posted on Date: Apr 2, 2019

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Recruiting is always a top priority for franchisee associations, but what happens if you receive interest from franchisees who are connected to your franchisor, such as family members or franchisees who are also employed by the franchisor? This issue of whether to allow franchisees who are especially loyal to a franchisor to join an association was a recent subject of a ‘heated’ dialogue on the American Bar Association Forum on Franchise Law. Some franchisee advocates argued that franchisor friendly franchisees should be barred from association membership as they are innately adverse to an association’s goals and objectives.

So what should your association’s policy be? Are you legally required to allow franchisor connected (or loyal) franchisees to join? If not, should you even consider these members who could oppose your agenda and who may report your association’s intentions to the franchisor?

Legally speaking, an association has the right determine its own criteria for membership. However, turning away potential members due to a perceived conflict of interest may end up harming the ultimate goals of your association to achieve a collaborative franchise culture in the long run!

A franchisor also has the right to recognize and engage its franchisee association, or to refuse recognition, and discriminatory practices by your association may negatively impact such a decision, and – more importantly – the franchisor’s willingness to engage with you. Most of our AAFD Chapters desire greater, not less, transparency with their franchisor as well as to be recognized as a positive force within the franchise network. If you turn away franchisees who have a good relationship with the franchisor, it could hurt your ultimate goal of developing a strong, equitable relationship with your franchisor!

While there may be significant exceptions, the AAFD generally counsels that association membership can and should be open to anyone who owns a franchise – even a franchisor executive who also owns a franchise. It may surprise some that an executive owning and operating a franchise can gain real insight to franchisee issues and concerns.

We also counsel that matters of conflicts of interest that arise can and should be resolved by disclosure of the conflicts and recusal where appropriate. If an association member takes actions that are adverse to the mission of the association, that situation can also be addressed by censure and membership termination (with appropriate hearing and due process before voting).

Consider that many franchisee associations seek to earn a seat on the franchisor’s board of directors. If a franchisee association bars membership in its association because of perceived conflicts, doesn’t the same standard apply when the franchisees want some form management inclusion?

Think carefully about your membership criteria before you automatically turn away a potential member because you think they are too close to your franchisor. If the goal is to achieve a collaborative relationship, is it wise to throw out barriers to collaboration? By treating related and loyal franchisees with the same respect that you seek, you can show your franchisor that you truly believe in establishing a fair and collaborative relationship.

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