Tuesday, February 27, 2007
In my Business Associations course, franchisor/franchisee relationships provide a wonderful opportunity to explore agency issues. As recently reported in The New York Times (warning, registration required), discontent among Quiznos franchisees provides a great opportunity for people who teach in this area to educate themselves as to the parameters of the relationship.
According to suits filed by the franchisees, Quiznos has been accepting $25,000 franchise-fee payments but then not finding store locations for its franchisees. In addition, as reported in the Times, plaintiffs contend that they are forced to buy everything they need to run their stores through designated suppliers and distributors owned or controlled by Quiznos, which permits the corporation to profit handsomely at the expense of its franchisees. Plaintiffs also allege that 40% of franchises fail to break even and that this fact is not disclosed to potential franchisees.
The disaffected franchisees have set up their own organization, Toasted Subs, whose website you can visit here.
The Times article reports on general discontent among franchisees. As Susan P. Kezios, president of the American Franchisee Association, told the Times, franchisees sign franchise agreements with which they must comply but which franchisors may alter unilaterally. "When they control how much you are going to pay them in royalties and advertising and then force you to buy all of your supplies from them, its not free enterprise anymore. It's indentured servitude."
Franchisees of the world unite! You have nothing to lose but your (franchisor's) chains!