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Self-regulation: a fresh approach to franchise relations. (Mediation. Arbitration. Litigation).



In any relationship, the potential for disagreements and misunderstandings exists, and the franchise relationship is no exception. Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.

When a person begins a civil lawsuit, the person enters into a process called litigation.
 and government regulation are ways to deal with such problems, but both often result in irreparable ir·rep·a·ra·ble  
adj.
Impossible to repair, rectify, or amend: irreparable harm; irreparable damages.



[Middle English, from Old French, from Latin
 damage rather than real solutions. As with a marriage, by the time the parties involved go to court, an unpleasant divorce is often the outcome. Recognizing this, the International Franchise Association and its members created a multi-faceted self-regulation program designed to offer alternatives to resolving disputes between franchisors and franchisees, and beyond that, to create a climate that minimizes the potential for conflict.

In 1993, the International Franchise Association (IFA Immunofluorescent assay (IFA)
A blood test sometimes used to confirm ELISA results instead of using the Western blotting. In an IFA test, HIV antigen is mixed with a fluorescent compound and then with a sample of the patient's blood.
) invited franchisees into its membership for the first time since it was chartered in 1960, setting in motion changes that redefined the entire franchise community. While the association had always promoted fair and equitable relationships among franchisors and franchisees, the active involvement of franchisee members .in its activities and deliberations opened the door to new avenues Of understanding, contributing to the development of IFA's self-regulation program.

Currently the program includes a strong code of ethics Code of Ethics can refer to:
  • Ethical code, a code of professional responsibility, noting what behaviors are "ethical".
  • Code of Ethics (band), a 90's Christian New Wave/Pop band
, online educational programs for franchisor compliance and investor awareness Investor Awareness is knowledge the investment community has of a company. [1] It can be looked at like this: “Do investors know about your company?” If the answer is “yes,” then it could be said that the company has “good investor awareness” , the IFA Ombudsman ombudsman (äm`bədzmən) [Swed.,=agent or representative], public official appointed to deal with individual complaints against government acts.  Program, endorsement of the National Franchise Mediation Program, and most recently, assumption of responsibility for administering the National Franchise Council (NFC NFC
abbr.
National Football Conference
) Alternative Enforcement Program. The self-regulation program's five components have evolved as the franchisee and franchisor members of IFA worked together to find solutions to the challenges encountered in franchising that are more effective than litigation or government regulation.

"There has been, over time, an almost seamless integration An addition of a new application, routine or device that works smoothly with the existing system. It implies that the new feature or program can be installed and used without problems. Contrast with "transparent," which implies that there is no discernible change after installation.  between franchisors and franchisees in the IFA? said Russell Frith frith  
n. Scots
A firth.



[Alteration of firth.]

Frith woods or wooded country collectively. See also forest.
, CFE CFE Conventional Forces in Europe (treaty)
CFE Cash Flow to Equity (finance/accounting)
CFE Comisión Federal de Electricidad (México)
CFE Certified Fraud Examiner
, IFA chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board.  of Lawn Doctor, Inc. Frith notes that Steven Siegel, a franchisee of Dunkin' Donuts Sources:

Dunkin' Donuts is an international coffee and donut retailer founded in 1950 in Quincy, Massachusetts, U.S. by William Rosenberg. Corporate Profile
History
, has just completed his term as IFA's first franchisee chairman. Additionally eight franchisees now serve on the board of directors and another franchisee, now secretary-treasurer, will be chairman in 2005. "I think there is an acknowledgement on both sides that there is a genuine and continuing need for the success of the other party in the equation," Frith continued. "We have to create every conceivable device that we can within reason to enhance the opportunity for good, clean ongoing relationships between franchisee and franchisor."

IFA Secretary-Treasurer Lawrence "Dr Cohen cohen
 or kohen

(Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male.
, CFE, is CE of Doc & Associates, franchisee of 14 Great American Cookies and two Pretzel Time outlets. As one of the first franchisees to join and become active in the association, Cohen sees a "remarkable improvement" in franchise relationships over the past 10 years. "There has been less and less of a line drawn between franchisee and franchisor and more of a feeling that we are all in franchising and are franchise partners. I think we have shown without a doubt that we have improved our systems by having open channels of communication and doing things like the self-regulation program, which shows that we all want to do the right thing."

Doing the Right Thing

While litigation and government regulation may have a goal of "doing the right thing," both often lack the basic understanding of franchise relationships needed to effectively accomplish those goals. "IFA's self-regulation initiatives are designed to provide real solutions to the challenges that sometimes face franchisors and franchisees," said IFA Executive Vice President Matthew Shay shay  
n. Informal
A chaise.



[Back-formation from chaise (taken as pl. )]

Noun 1.
. "We believe the program of self-regulation we have created provides a cost-effective and efficient solution that will permit them to focus their efforts on building their brands and minimize any disruptions to their relationships that might result from occasional disputes."

Les Wharton, who chairs IFA's Corporate Counsel Committee and is vice president, legal affairs for the franchise and license division of Spherion Corp., commented, "We felt one of the roles of a trade group is to insure that the public perspective of the group is positive, so you don't end up with a public or lawmakers who decide that more law needs to be enacted to control or govern the group. That's what self-regulation is all about, to make sure you don't have people within the franchise community doing things that are inappropriate."

Larry Schauf, CFE, executive vice president, general counsel and secretary of Jack In The Box, Inc. and a member of IFA's board of directors added, "Having franchisees and franchisors in the same organization, accepting the same kind of remedies and procedures for resolving disputes, is much preferable to government intrusion."

"Franchising has a strong element of entrepreneurism," he continued, "and the last thing you want in entrepreneurism is too much government involvement. We have always endorsed and embraced full disclosure by franchisors, but we think that is sufficient. Too much government interference could kill the goose that lays the golden franchise egg."

System-wide Membership

A growing franchisee membership in IFA is essential to insure the association's self-regulation program truly represents the entire franchise community. To that end IFA's system-wide membership program offers franchisor members the opportunity to enroll all of their franchisees as members at the same time, either by supplying franchisee e-mail addresses See Internet address.

e-mail address - electronic mail address
 for IFA to enroll them directly or by asking them to sign up individually. More than 6,000 franchisees already have joined through this program, and IFA is actively recruiting additional systems to participate. "System-wide membership is a key to get more franchisees involved, because we are really in the business of preserving and protecting franchising." Frith said.

"As there becomes a broader understanding of the issues, and IFA is able to demonstrate that we can be a voice in impacting issues that affect franchisees, such as regulation or legislation on minimum wage, health care, depreciation--things that really affect franchisees in a very clear, non-abstract way--as that manifests itself, we will see more and more systems having system-wide membership in IFA."

Step-by-Step Solutions

"IFA's self-regulation program is structured in such a way as to provide an appropriate alternative at every stage of a possible dispute," Shay explained. "So depending upon where the system or the franchisee is--where the dispute is along that continuum--and depending on what kind of assistance you need to get the dispute resolved or avoid a dispute, you can pick and choose a la carte from this menu of options."

Online education-is the first step on the self-regulation ladder, with two separate programs, one designed for franchisors and one for prospective franchise investors. "If you are a franchisor who needs assistance in complying with franchise disclosure law or if you are a potential investor in a franchise and you want to know more about your options or what you should be looking for Looking for

In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with.
, you can take advantage of the online educational programs. It's very easy to do, very cost effective," Shay said.

The second step is designed to help a franchisor or franchisee who needs help in resolving an issue. At this stage, the IFA Ombudsman provides a confidential third party to help talk through the issue and offer impartial assistance in resolving the dispute. Shay reports there have been about 30 matters referred to the IFA Ombudsman over the past two years on a wide range of issues relating to relating to relate prepconcernant

relating to relate prepbezüglich +gen, mit Bezug auf +acc 
 encroachment An illegal intrusion in a highway or navigable river, with or without obstruction. An encroachment upon a street or highway is a fixture, such as a wall or fence, which illegally intrudes into or invades the highway or encloses a portion of it, diminishing its width or area, but , termination, sourcing and supply and other issues.

"The ombudsman's role has been to engage the parties in some creative thinking and some independent counseling and try to assist both in considering alternative options to resolving the dispute," Shay said. "This has been very effective at helping keep the parties focused on the business as opposed to becoming consumed with the dispute. Sometimes those conversations with the ombudsman have proved sufficient to completely address the issues that were creating the problem. We encourage people to start with the ombudsman before going any further."

For those disputes needing a more structured approach, IFA has endorsed the National Franchise Mediation Program (NFMP NFMP No Fee Mortgage Plus (Bank of America)
NFMP Navy Foreign Material Program
). Established in 1993, the NFMP program is administered by the CPR Cardiopulmonary Resuscitation (CPR) Definition

Cardiopulmonary resuscitation (CPR) is a procedure to support and maintain breathing and circulation for a person who has stopped breathing (respiratory arrest) and/or whose heart has stopped (cardiac
 Institute for Dispute Resolution and is governed by a steering committee steer·ing committee
n.
A committee that sets agendas and schedules of business, as for a legislative body or other assemblage.


steering committee
Noun
 comprised of equal numbers of franchisee and franchisor representatives. Any franchisor can join the NFMP, which draws its mediators from a panel of over 200 prominent attorneys located throughout the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. .

Larry Schauf was instrumental in starting and implementing the NFMP. "At the time it was done by a group of franchisors separate from any organization, because back then IFA included only franchisors, and we wanted to make sure it was seen as a good faith effort by one side of the issue to do it right and fair."

Schauf reports the NFMP has enjoyed tremendous results. "So far, when a case was submitted by both parties to the NFMP, above 90 percent were solved to the satisfaction of both parties. That is one of the most interesting things about mediation and this program. It not only has a high success rate, but that means that both sides are happy because neither side has to settle if they aren't. It is only a win-win situation; it can never be a loss for anybody."

The most recent addition to IFA's Self-Regulation Program is the Alternative Franchise Sales Law The law relating to the transfer of ownership of property from one person to another for value, which is codified in Article 2 of the Uniform Commercial Code (UCC), a body of law governing mercantile transactions adopted in whole or in part by the states.  Enforcement Program, which was developed by the National Franchise Council (NFC) in 1998. NFC, which became a division of the IFA in March, has administered the program to 30 franchisors referred by the Federal Trade Commission and state agencies. The program provides comprehensive franchise sales law compliance training and is a cost-effective and efficient mechanism by which to deliver remedial compliance training to franchise systems that have committed minor or technical violations of franchise regulations.

Doc Cohen views the alternative enforcement program as an important part of the self-regulation initiative because, "This is the piece that educates franchisors on how to do it."

Cohen explained, "My view is that most franchisors do not intentionally go out and violate the FTC FTC

See Federal Trade Commission (FTC).
 Rule. Most franchisors want to be doing franchising right. It is such a complex set of rules that there are times when there is a violation. And if some newer franchisors who come in perhaps need the remedial education, the NFC program provides that piece."

The final and perhaps most important element in the self-regulation program is IFA's Code of Ethics, which demonstrates that the IFA and its members subscribe to Verb 1. subscribe to - receive or obtain regularly; "We take the Times every day"
subscribe, take

buy, purchase - obtain by purchase; acquire by means of a financial transaction; "The family purchased a new car"; "The conglomerate acquired a new company";
 the highest levels of trust, integrity and honesty.

"I think the Code in and of itself carries a lot of weight and sets the baseline for self-regulation," said Frith. "We have the Code and we say we are going to enforce that Code, and we are going to make sure you understand what franchising is about and how to conduct yourself. I think the clearer things are made, the less likelihood there is of conflicts. And certainly the ability to remove somebody from the association if there comes a 'point in time that someone has clearly breached the Code, that puts teeth in it."

Les Wharton believes the Code offers the overlying overlying

suffocation of piglets by the sow. The piglets may be weak from illness or malnutrition, the sow may be clumsy or ill, the pen may be inadequate in size or poorly designed so that piglets cannot escape.
 guidelines that tie the entire program together. "If you overlay the context of the Code of Ethics that we adopted some years back to guide our membership in, among other things, their relations with franchisees, all of these things "These Things" is an EP by She Wants Revenge, released in 2005 by Perfect Kiss, a subsidiary of Geffen Records. Music Video
The music video stars Shirley Manson, lead singer of the band Garbage. Track Listing
1. "These Things [Radio Edit]" - 3:17
2.
 work together to assure that franchisees feel, if they cannot resolve a problem directly, they have other choices. They have a safety valve safety valve, device attached to a boiler or other vessel for automatically relieving the pressure of steam before it becomes great enough to cause bursting. ."

Education and Communication

The remaining task for IFA's self-regulation program is to continue to educate the franchise community as to its availability and benefits to franchisees and franchisors.

"I think the challenge we have is endorsement and communication," Doc Cohen said. "We need to make sure we educate everyone about the program, what it will do, what it won't do, and how to take advantage of it. Then I think the program will speak for itself. It has already. People who have used it so far are very pleased with the results."

As more of the franchise community understands and embraces the program, Frith said everybody wins. "We have a more enlightened franchisee. We have one that feels more comfortable in the process because there are these different devices. We have franchisors who are more understanding and educated as to the appropriate process. So as a result, you have a better environment for an entrepreneur to own a small business. It all wraps together with a big benefit back to the general public and the economy."

The National Franchise Mediation Program (NFMP)

The National Franchise Mediation Program (NFMP) was created in 1993 by a group of International Franchise Association franchisor members who wanted to provide an alternative dispute resolution Procedures for settling disputes by means other than litigation; e.g., by Arbitration, mediation, or minitrials. Such procedures, which are usually less costly and more expeditious than litigation, are increasingly being used in commercial and labor disputes, Divorce  mechanism designed specifically for the franchise community and dedicated to resolving franchise disputes and preserving franchise relationships. Since its founding, the NFMP has facilitated resolution of nearly 90 percent of the disputes submitted to the program for mediation.

IFA endorsed the program from its inception, embracing the concept that franchise relationships are uniquely interdependent business relationships in which effective communication, trust and conflict resolution are of paramount concern. In order to facilitate creative approaches to resolving disputes that sometimes arise in franchise relationships, and preserving the stability of those relationships for the long-term, IFA has actively promoted the NFMP as an effective alternative to traditional methods of conflict resolution, namely lawsuits and litigation.

Originally founded by and for franchise systems, the Steering Committee of the NFMP now includes equal numbers of representatives of both franchisors and franchisees. The diversity of the NFMP Steering Committee reflects the joint commitment of both franchisors and franchisees to promote, publicize pub·li·cize  
tr.v. pub·li·cized, pub·li·ciz·ing, pub·li·ciz·es
To give publicity to.


publicize or -cise
Verb

[-cizing, -cized]
 and encourage utilization of the NFMP by all members of the franchise community. Current members of the Steering Committee include IFA board and franchisee member William Hall For the 1829 governor of Tennessee, see .

William Hall VC (April 28, 1827 – August 25 1904) was the first black person, the first Nova Scotian, and third Canadian-born recipient of the Victoria Cross.
, one of the first franchisees invited to join the Steering Committee, and recent additions to the Steering Committee include representatives of the Asian American A·sian A·mer·i·can also A·sian-A·mer·i·can  
n.
A U.S. citizen or resident of Asian descent. See Usage Note at Amerasian.



A
 Hotel Owners Association (AAHOA AAHOA Asian American Hotel Owners Association ).

The Steering Committee is committed to finding new opportunities to publicize the existence of the NFMP, and several members of the Steering Committee recently conducted a "mock mediation" during a general session of the AAHOA annual meeting and convention. The NFMP is regularly promoted and featured at franchise system and franchisee association meetings as a way in which to educate the franchise community about this effective means of dispute resolution.

For more information about how your system can take advantage of this program, contact Peter Philips Peter Philips (c 1560–1628) was an eminent English composer, organist, and Catholic priest exiled to Flanders after the start of the Protestant Reformation. He was one of the greatest keyboard virtuosos of his time, and transcribed or arranged several Italian motets and , NFMP director at 202-949-6490 or pphilips@cpradr.org.

Polly Larson is a freelance writer based in Snow Hill, Maryland Snow Hill is a town in Worcester County, Maryland, United States. The population was 2,409 at the 2000 census. It is the county seat of Worcester CountyGR6. . She was editor of Franchising World for 14 years and now contributes frequently to the magazine.
COPYRIGHT 2003 International Franchise Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003 Gale, Cengage Learning. All rights reserved.

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Author:Larson, Polly
Publication:Franchising World
Geographic Code:1USA
Date:Jul 1, 2003
Words:2403
Previous Article:The legal atmosphere of franchising. (In This Issue).
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