AAFD adopts new Fair Franchising Standards – Show news – American Association of Franchisees and Dealers
SAN DIEGO — The American Association of Franchisees and Dealers (AAFD) has announced the adoption of three new Fair Franchising Standards. The new standards define exemplary practices in three distinct aspects of a franchise relationship: 1. The use of personal guarantees in a franchising transaction; 2. The rights of a franchisor to sell or transfer the entire franchise system; and 3. The use of so-called “gag order” agreements to keep the settlement of disputes confidential.
AAFD Chairman Robert Purvin said, “These new standards continue the AAFD’s leadership in defining and promoting exemplary franchising practices. Equally important, these new standards continue our tradition of protecting the legitimate interests of franchisors and franchisees through a negotiated process. Enormous credit goes to our Standards committee Chair, Richard Rosen, for his dedication to fairness, and to our entire Committee for their hard work and dedication to defining quality franchising practices that are fair to everyone.”
Rosen described the effect of the new standards: “The AAFD has recognized that personal guarantees may be appropriate when a franchisor looks to the principals of the purchaser of the franchise for the ultimate performance of the franchisee’s obligations, but the new standard suggests that guarantees should be negotiable. The second adopted standard recognizes the right of a franchisor to sell the franchise system, but imposes a duty to exercise the right responsibly and give due consideration to the transferee’s ability and intent to support the system and to assume the franchisors obligations as set forth in the franchise agreements. The new standard regarding gag orders recognizes the practical need for non-disclosure provisions in order to encourage the settlement of disputes, while calling for the disclosure of the existence of such gag orders in the franchisor’s Uniform Franchise Offering Circular.”
The ASFD is the oldest and largest direct member non-profit trade association representing the interests of franchisees and independent dealer networks throughout the United States. For information, visit www.AAFD.org.
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