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You Asked, We Answer – Why Would the AAFD Accredit a Franchisor with a Bad History: A Case Study

Posted on Date: Jul 25, 2013

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The AAFD recently received an inquiry about our awarding of the coveted Fair Franchising Seal to Tutor Time, a company that had been previously disciplined by the US Federal Trade Commission. We thought all AAFD Members and subscribers would be interested in our answer:

Thank you for your recent inquiry to the AAFD. You asked: “I know the FTC action [against Tutor Time] was a long time ago, but how can a potential franchisee trust your organization when one of your accredited franchisors had engaged in the sort of practices you are trying to prevent?”

Tutor Time went through a complete change of ownership 10 years before the company was accredited by the AAFD, and the company we accredited had completely different ownership and no connection with previous management.

Notwithstanding the fact that this was completely different ownership, AAFD accreditation is available to companies that atone for past errors and reform their franchise practices to meet the AAFD’s high standards. The criteria for AAFD Accreditation are set forth on our website:

1. The company must recognize and bargain with an independent franchisee association, and the association must nominate the company for accreditation.
2. The AAFD Committee on Standards must find that the franchise agreement we are accrediting is consistent with the AAFD’s Fair Franchising Standards – this may involve substantial negotiations with the franchisee association to amend to agreement to meet our criteria. We will not accredit a company whose agreement is not 85% in conformity with our standards..
3. Once our Standards committee votes in favor of accreditation, the independent owners association must agree with our findings and also find that the company’s actual practices are consistent with our Standards. The FOA must then nominate and endorse the company to receive the AAFD’s Fair Franchising Seal.
4. Finally, the AAFD conducts a telephonic survey of all franchisees in the system and asks three questions:
a. Are you reasonably satisfied with the franchise agreement under consideration for accreditation?
b. Are you reasonably satisfied with your relationship with your franchisor?
c. Do you vote for your franchisor to be accredited by the AAFD?
d. We must attempt to contact every franchisee in the system (at least three attempts); we must reach 80% of the owners; and 75% of those reached must answer affirmatively to each question.

For Tutor Time, all of these conditions were met. Tutor Time engaged in a six-month mediated collective bargaining for a new franchise agreement, both sides represented by capable counsel. The resulting agreement was 96% conforming to the AAFD Standards, and 90%+ of the franchisees voted in favor of accreditation.

I will match our stringent requirements against any accrediting organization you can name. Although the AAFD confers accreditation, it is the franchisees of the franchise system, counseled and represented by their independent owners association, that determine if a company will be accredited. [You might contact the Federal Trade Commission and ask their opinion of the AAFD Accreditation Program].

Indeed, we may have set the bar too high, such that we don’t have sufficient accredited product to make a meaningful dent in the marketplace. Our dream is that one day, no one would even think of investing in a franchise opportunity that hasn’t been accredited by the AAFD.

Although you asked about Tutor Time, a better example might be Meineke Car Care Centers, which ended a 10-year war with its franchisees before gaining AAFD accreditation. In fact, the process of accreditation for Meineke was a big part of rehabilitating a brand in serious trouble. The brand and its owners association have now developed a strong bond of collaboration, and Meineke became the AAFD’s poster child of how the AAFD can help to rehabilitate a brand with the prize being the AAFD Fair Franchising Seal.

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