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THE LATEST EXAMPLE: A group of
Weight Watchers International franchisees filed arbitration claims last year
when the chain was owned by H.J. Heinz Co. of Pittsburgh. At the time, Heinz
was negotiating a sale of the chain. The franchisees were concerned about
advertising support, an increase in the amount they were charged for mailing
lists, and the practice of charging interest on amounts owed by the
franchisees, according to Michael Dady, an attorney for the Weight Watchers
franchisees.
Negotiations are continuing — even as Weight
Watchers has a new owner, Artal Luxembourg SA, a European private-investment
company. “The new owner recognizes that peace in the system is good for
everyone,” Mr. Dady says. Artal’s investment adviser, Invus Group Ltd., New
York, couldn’t be reached for comment.
Other industries are seeing outlet owners fret
over the reputation of the new owner or possible changes to their tightly
worded franchise contracts. Among the topics of concern: having their outlets
closed, quality control throughout the chain and exclusive-territory
agreements.
Trouble also looms at Ben & Jerry’s Homemade
Inc., which is facing takeover overtures from Unilever NV and others.
Franchisees at the ice-cream chain, a heretofore content lot, worry that if
Ben & Jerry’s is acquired, a new owner might force them to change the
“socially responsible” spirit of their shops. Thus far, the franchisees have
concentrated their efforts on shaping public opinion by holding rallies
outside their shops, among other initiatives.
To be sure, advocates for the outlet owners say
the new owners usually get their way. So the outlet owners look for the bully
pulpit — and it sometimes works. To avoid disputes, acquiring chains are
cutting deals.
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The case of Great American
Cookie Co. illustrates the point. When Mrs. Fields’ Original Cookies proposed
buying it, the Great American outlet owners were alarmed. After all, for
years they had been telling customers that theirs was the better cookie. Now,
they feared, they would be second tier when it came to national advertising
and store locationsor worse, would be forced to surrender their name. So, the
Great American Cookie franchisees sued.
To settle the case before trial, the franchisees
were granted assurances that they could keep their brand names and were given
a chance to cash out.
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Dot-coms sack fast-food ads at the Super Bowl.
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OUT TO LUNCH: Dot-coms
sack fast-food ads at the Super Bowl.
For 13 years, Robert Purvin, chairman of the
American Association of Franchisees and Dealers, has tracked Super Bowl
commercials. He says food is getting squeezed out by Internet companies.
“Where was McDonald’s? Where was Taco Bell? Where
was Burger King?” he asks. “I think they were all frightened away by the
prices.”
The rates for ads did jump, an average of $2.2
million for 30 seconds, compared with $1.6 million the year before. The
study, to be released today, shows there were only two fast-food ads, Pizza
Hut and Jack-in-the-Box, out of 154 Super Bowl commercials. By contrast,
there were 36 Internet company ads, up from six in 1999.
Mr. Purvin says the percentage of all
franchise-related ads slipped, which he sees as another example of the
Internet’s threat to the traditional marketing and distribution systems of
franchising.
BREAKING THE CODE: A franchiser group moves
to rewrite its ethics rules.
The International Franchise Association wants to
scrap its eight-year-old “Code of Principles and Standards of Conduct” in
favor of a more general “aspirational code,” expected to be finalized over
the next several months.
The trade group, dominated by franchise chains,
for years has been chided by outlet owners who consider the code a joke and
say the IFA hasn’t acted against its members over mistreatment of outlet
owners. “It’s had absolutely no effect on the behavior of franchisers,” says
Susan Kezios, president of the American Franchisee Association, an
outlet-owner group.
Under current terms, complaints can be lodged
against franchisers or franchisees. After several steps, complaints can go
all the way to the IFA’s board, which has the power to cancel the offending
party’s membership. But in eight years, a complaint has never gotten to the
board level, says Matthew Shay, the IFA’s legal counsel.
He stresses that the code has had its benefits,
that in a “handful” of cases companies have been denied membership, or had
their membership suspended, based on initial inquiries of code violations.
Mr. Shay declines to identify the companies.
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But the densely worded
four-page document duplicates many items covered in franchise contracts and
government regulations, and is subject to legal hairsplitting.
So the IFA is working with the Ethics Resources
Center, Washington, D.C., a nonprofit organization that helps trade
associations establish a uniform set of standards. The IFA also plans to
promote peaceful systems, and is looking to set up an ombudsman program to
help settle issues in those systems that aren’t so peaceful.
Mr. Shay says the IFA’s new code will spell out a
model of ethical conduct in “plain English” that people will pay more heed.
Copyright © 2000 Dow Jones & Company, Inc.
All Rights Reserved
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