We are continuing our discussion of a current trend in franchising: franchisee associations. In New Jersey and elsewhere, franchisees have been banding together to file legal actions against franchisors. One association's attorney says he has seen at least a dozen associations form over the last year as the individual business owners have become more frustrated with shrinking profits and changing terms of franchise agreements.

Usually, the association attorney adds, the bottom line is the bottom line -- nothing too complex. But by forming associations, the owners get around a key contract term: Franchise agreements generally require that disputes between individual owners and management be resolved through arbitration. If they band together, the owners can sue.

It has proven an effective strategy. An association of franchisees sued Burger King Corp. a few years ago over a company pricing mandate. The settlement includes a promise that corporate will make those kind of decisions differently in the future.

A more notorious example is an Edible Arrangements dispute. The franchisor issued an edict in March 2010 that required stores to be open on Sunday and to stay open two hours later the rest of the week. The decision seemed arbitrary to the owners, because the parent company did not take local demographics or personal factors into consideration.

As one franchisee puts it, the franchise agreement is illusory -- the terms change regularly. "It is a living, breathing document that changes whenever the franchisor wants to create another revenue stream," she says. The most recent change is management's attempt to collect 2 percent of gross Internet sales from each owner.

The president of Edible Arrangements says these claims are without merit. He also says that the company's actions are meant to benefit the franchisees.

Franchisees and franchisors employ about eight million Americans. Every year for the past three years, more franchisees have closed their doors than opened them.

Source: Wall Street Journal, "Tough Times for Franchising," Sarah E. Needleman, Feb. 9, 2012