Vanderbilt Law Review

First Page



Assume that you are the franchisee of a nationwide restaurant chain. Your franchisor has acted contrary to what you believe to be in your best interest. For the franchisor, bigger is better: more outlets and discount programs mean higher sales volume and consequently additional franchise fees and royalties, with royalties typically being based on gross sales-not franchisee net profits. You are concerned that the franchisor is oriented more toward expansion than the well-being of existing franchisees. Franchisor assistance is less than you expected, but royalties and other charges seem steep.Facing a strong franchisor that appears not to worry about an individual franchisee's complaints, you join with fellow franchisees to press your claims collectively. This association serves both as a communications clearinghouse and a means to increase franchisee bargaining power. In response, however, the franchisor challenges your group in the following ways: By setting up its own franchisee group or "advisory council," by seeking to terminate the franchises of supposedly disruptive franchisees, and by insisting that each franchisee-as a separately owned and operated business-must bargain alone. Even your attorneys apprise you of the limited rights that franchisee groups may have, and they warn you about potential antitrust violations.Franchisee associations are often a natural, indeed necessary, development in a maturing franchise system. Why, then, does the law ac-cord these groups few rights and much potential liability?

This Article describes the current state of the law, analyzes its validity and implications, and discusses proposals to protect franchisees,including franchisee collective bargaining rights and an antitrust exemption for franchisee associations. The following areas of the law are examined: Constitutional issues, state and federal franchise laws, procedural issues, labor relations law, and antitrust law. As franchising law continues to develop, the subject of franchisee collective rights ultimately will be on the cutting edge of the law, at the intersection of franchise, labor, and antitrust law. Thus, this Article analyzes and synthesizes these diverse areas of law, illustrates why none of them protect franchisees sufficiently, and then recommends changes to the current legal framework.