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FranNet CEO on Mission to Clean Up Brokerage Biz


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“I want to raise the bar so high they can’t get over it, or they clean up their act so they don’t harm the industry,” says Jania Bailey, CEO of FranNet, who has launched a broker disclosure document or BDD.

Jania Bailey believes what the franchising world needs is another franchise disclosure document or FDD, but this time for brokers. Her company, FranNet, is launching what she calls the first broker disclosure document or BDD in franchising, meant to throw open the doors on the often hidden ways that third-party franchise brokers work.

 “It just made sense to put it in writing. It takes out the mystery,” says Bailey.

The document her firm created explains: “Here’s who we are. Here’s how we do business,” she says, adding before she became CEO of FranNet she was a banker for 18 years, and was a fan of full transparency and disclosure.

Despite everyone who loves to hate the required and voluminous FDD, Bailey says she’s gotten a good response for her add-on idea. “I’m very pleased that we did this, and I’m more than thrilled with the reception I’ve gotten.” She adds: “I promise it won’t be 200 pages. I think we’re at about 10 pages right now.”

She says there are many honorable players but also plenty of bad behavior in the brokerage sector. “When you see groups bragging about we have hundreds and hundreds of brokers and hundreds and hundreds and hundreds of franchisees, you’ve got to wonder what’s going on,” she says. “I want to raise the bar so high they can’t get over it, or they clean up their act so they don’t harm the industry.”

Bailey serves on the board of directors of the International Franchise Association, and says other brokers are starting to publish their own BDDs. The next step, she says, would be to create a broker certification program with IFA participation, possibly as part of the CFE or certified franchise executive program.

She says there’s a lot of confusion among franchisees and franchisors about what they’re getting when they work with a broker, in large part because different companies follow different business models

“People start talking about brokers, and they lump this whole group into one pile,” she says. “For example, we don’t sell franchises, that’s not what we do. No. 1, we would never recommend or introduce a client to only one franchise. We’re not selling; we’re taking a client through a process.

“Some of these others you’re talking about are outsourced sales companies. That’s a whole different animal,” she says, although presumably those who operate under different business models would be able to fully defend their own practices.

“I don’t think franchisors realize if they’re working with a less than tier one that that broker could be making earnings claims on their behalf and/or could wind anybody who’s touching it in court,” she says. “I don’t like it when people lump us in with the others, so I’m going to do everything I can think of to say, Here’s who we are. Do you really know who they are?”

Robert Cresanti, CEO of the IFA, is on board. “Right now we have a number of brokers that are members as suppliers of the IFA, so I just want to hold this up as a shining example of somebody doing what I think is the right thing,” he said in an interview about FranNet’s effort. “It’s market leading, and it’s directionally absolutely true. That’s why I got excited about it.”

He was asked about the IFA's August 21 regulatory alert about the FDD, which said: “An important part of the franchise model is at stake—the Franchise Disclosure Document,” which is required under the FTC Franchise Rule and up for its 10-year review.

“IFA is working to defend the FTC Franchise Rule and keep it from being eliminated or drastically modified. We have a strategy in place that involves participating in FTC hearings, submitting statements on behalf of the industry, developing research that supports maintaining the rule, educating lawmakers and more,” the alert said in part.

Asked to confirm the Trump Administration was working to do away with the rule, he said, “Yes, it’s a very real thing. We are working on it. It is a real possibility. We’re trying to keep it from becoming a probability.”

“We’re very concerned about that happening because it could de-stabilize a very predictable and well understood area of the law," he said. Jenna Weisbord, senior communications manager at IFA, said he wouldn't discuss the issue further on the record until a later time. 

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Tom KaiserTom Kaiser is senior editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
 
Beth EwenBeth Ewen is editor-in-chief of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
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Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
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