The American Association of Franchisees and Dealers (AAFD) acts as a

consumer protection Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent business ...

organization that exposes the

unethical Ethics is the philosophical study of moral phenomena. Also called moral philosophy, it investigates normative questions about what people ought to do or which behavior is morally right. Its main branches include normative ethics, applied eth ...

practices that exist in the

franchising Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses some or all of its know-how, procedures, intellectual property, use of its busines ...

community, and to educate the public regarding fair franchise rules, and quality franchise opportunities.

History

The American Association of Franchisees and Dealers (AAFD) came into existence because United States laws which purport to regulate franchising effectively legalize abusive franchising practices, rather than restrict franchise fraud. As long as the franchisor discloses the details of its practices, the unethical practices are enforceable. The AAFD seeks to provide a counterbalance to franchisee-unfriendly franchising regulations and franchise misrepresentations in the franchising industry by providing resources to franchise associations, franchisees, franchise owners and prospective buyers. The AAFD is a national

non-profit A nonprofit organization (NPO), also known as a nonbusiness entity, nonprofit institution, not-for-profit organization, or simply a nonprofit, is a non-governmental (private) legal entity organized and operated for a collective, public, or so ...

trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific Industry (economics), industry. Through collabor ...

dedicated to defining and promoting best franchise practices.

Fair Franchising Standards

The AAFD established balanced standards of fair franchising practices for the franchising community so that franchise buyers would have objective criteria by which to judge a franchise opportunity.

Franchisee Bill of Rights

The American Association of Franchisees and Dealers House of Delegates adopted and promulgated the Franchisee Bill of Rights on June 6, 1996, and works to promote awareness and acceptance of these rights among the franchising community and the general public: The Franchisees of America, representing the best of the American entrepreneurial spirit, hereby recognize and demand a basic minimum of commercial dignity, equity and fairness. In recognition there of, the franchisees of America do proclaim thi
Franchisee Bill of Rights
as the minimum requirements of a fair and equitable franchise system.

Franchise Regulations

Franchise fraud is defined by the United States

Federal Bureau of Investigation The Federal Bureau of Investigation (FBI) is the domestic Intelligence agency, intelligence and Security agency, security service of the United States and Federal law enforcement in the United States, its principal federal law enforcement ag ...

as a

pyramid scheme A pyramid scheme is a business model which, rather than earning money (or providing Return on investment, returns on investments) by sale of legitimate product (business), products to an end consumer, mainly earns money by recruiting new members ...

. The success of the franchising format of

small business Small businesses are types of corporations, partnerships, or sole proprietorships which have a small number of employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as "small" in terms of being ...

ownership has led to a significant imbalance in the relative bargaining power of franchisors and franchisees. Today, in the

franchise agreement A franchise agreement is a legal, binding contract between a franchisor and franchisee. In the United States franchise agreements are enforced at the State level. Prior to a franchisee signing a contract, the US Federal Trade Commission regulates i ...

contract, the modern franchise frequently provides no exclusive territory, restricts the activities of the franchisee as an independent businessperson, provides that the franchisor controls the franchise location and restricts the franchisee from continuing in business upon

franchise termination Franchise termination is termination of a franchise business license by a franchisor or a franchisee. The United States Federal Trade Commission administrates oversight of preinvestment franchise disclosures via The Franchise Rule. Franchise agr ...

. The modern franchisee may be merely a license to operate the business on behalf of the franchisor for the term of the franchise. Some franchises agreements specifically state that the franchisee owns no equity in the business, and that the business really belongs to the franchisor. Most modern franchise agreements promise very few required services and little support from the franchisor.

Franchise Rule

In the United States, franchising is regulated by a complex web consisting of the

Federal Trade Commission The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) United States antitrust law, antitrust law and the promotion of consumer protection. It ...

'' Franchise Rule'', state laws, and industry guidelines. The most recent version of the Franchise Rule was in 2007, is printed in the

Federal Register The ''Federal Register'' (FR or sometimes Fed. Reg.) is the government gazette, official journal of the federal government of the United States that contains government agency rules, proposed rules, and public notices. It is published every wee ...

/ Vol. 72, No. 61 / Friday, March 30, 2007 / Rules and Regulations, pages 15544 to 15575. (page 1 to 133 of this cited pdf file) The Franchise Rule specifies what information a franchisor must disclose to a prospective ''franchise business'' as a ''franchise opportunity''. Franchisors that practice franchise fraud will attempt to pressure a franchisee leaving the franchise system sign a

non-disclosure agreement A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA), is a legal contract or part of a contract between at le ...

, confidentiality agreement, or a

gag order A gag order (also known as a gagging order or suppression order) is an order, typically a legal order by a court or government, restricting information or comment from being made public or passed on to any unauthorized third party. The phrase may ...

. The gag order will help prevent prospective new franchisees learning important details about the churning franchise. In May 2024 the AAFD published an important white-paper on '
The New NLRB Joint Employer Rule
Unpacking the Conundrum for Franchisees: Why AAFD Accreditation can eliminate the Joint Employer Threat in Franchising.

References

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External links

Official website
Trade associations based in the United States Consumer rights organizations Consumer protection in the United States