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What Is a Franchisee Advisory Council?

 

Many franchisors have established, or have reserved the right to establish, a Franchisee Advisory Council (“FAC”) on behalf of their franchise system.  A FAC is organized by the franchisor and consists of a group of franchisees whose general purpose is to communicate to the franchisor any issues they may have regarding the franchise system and express their opinions on ways the system can be improved.  The specifics regarding the creation, termination, fees, and rules and bylaws of the FAC, including the regulations for how franchisees are selected to participate in the FAC and for how long, should be outlined in the Franchise Agreement or other materials supplied by the franchisor.  Since FACs are unique to the franchise system for which it was created, FACs vary widely from system to system.  For example, some systems may create one FAC that covers the entire franchise as a whole, while others may create several regional FACs in order to address different needs based upon regional groups.  However, in almost all cases, a FAC serves in an advisory capacity only and its decisions are not binding on the franchisor.  Despite this, having a FAC for your franchise system still provides benefits to both the franchisor and franchisees.  Some of the benefits of a FAC include:

  • Providing a designated channel for open communication between the franchisor and its franchisees;
  • Building trust and camaraderie amongst the franchisees as a group, as well as, between the franchisees and franchisor; and
  • Conceptualizing ways the franchise system can be improved for the benefit of the system as a whole.

Keep in mind that a FAC can also be viewed as a burden or a waste of time by franchisees if it is not effective.  For example, if the franchisor doesn’t listen to the FAC and maintain an open mind, some franchisees may feel like they are not actually being heard, especially since its decisions are not binding on the franchisor.  Also, franchisees are usually not compensated for their time and effort spent in participating in a FAC and, depending on the franchisor, participation could require a significant amount of their time and/or effort and end up becoming more burdensome than helpful.  If you are thinking of purchasing a franchise that has established a FAC, you should make sure to discuss the FAC with current franchisees and ask them exactly how the FAC works, how the franchisor interacts with the FAC, and whether or not they believe the FAC has been effective within the franchise system.