Originally introduced in 1998 and passed in 1999, the Small Business Franchise Act (SBFA) is has put into place certain safeguards designed to eliminate fraud and other activities that might exploit franchisee investors. Common opinion holds that the SBFA was introduced in order to give franchisees additional bargaining power against franchisors.
Michigan congressman John Conyers, Jr. stated that “Protecting the rights of franchisees is ultimately about protecting the rights of small businesses.â€
The proof is in the details:
1) The bill reinforces existing prohibitions. The SBFA is a reminder that perpetuating fraud within the franchisor-franchisee relationship is prohibited.
2) The bill mandates good behavior and faith. Unsurprisingly, not everyone follows the rules in the world of franchising. The SBFA looks out for small franchisees by requiring all parties to act honestly with each other and observe reasonable standards of fair dealing in the industry.