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Franchisor Group Responds to California Fair Franchising Bill

WASHINGTON, D.C. — The International Franchise Association thinks that California's state bill will hurt consumers, franchise unit sales and job growth by adding unnecessary government restrictions."Despite being portrayed as pro-franchisee legislation, the bill will hurt franchisees and franchisors alike," says the IFA's Vice President of Communications and Marketing Alisa Harrison in a response to Blue MauMau on what the organization thinks of California's new fair franchising bill. "For these reasons, IFA opposes Assembly Bill 2305," declares Harrison.

The IFA has roughly 1,300 paid franchisor members and 500 vendors as members of its organizations. Store owners of franchisor members can participate in the group free of charge. It's response on California's fair franchising bill follows:

We believe that Assembly Bill 2305 will hurt franchise businesses, job growth efforts, and consumers by adding unnecessary restrictions to franchising opportunities. Despite being portrayed as pro-franchisee legislation, the bill will hurt franchisees and franchisors alike. For these reasons, IFA opposes Assembly Bill 2305.

Assembly Bill 2305 will hurt consumers. Franchisors impose standards and expectations on all franchisees to protect the brand's reputation, other franchise owners nearby, and, ultimately, the general public – their collective customer. This bill will allow sub-standard franchise outlets to continue offering inferior products and services to consumers.

Assembly Bill 2305 will hurt both franchisees and franchisors. It limits the ability of the franchisor to freely develop its business by interfering in a contract between two consenting parties, and would create the most limiting constraints on franchise growth in the country. The encroachment provisions of the bill would limit a company's ability to add additional locations and freeze economic development through franchising in California. Such protectionist language would limit franchise opportunities for women and minorities and inhibit a franchisor's ability to receive infusions of new capital, vital to sustaining and expanding a brand.

Assembly Bill 2305 will inhibit job growth. During a period of stagnant growth globally, franchisors, like many other businesses, are being extremely judicious with their investment capital. Adopting such burdensome legislation would undoubtedly force franchisors to look to other states to expand their brand – taking jobs and new businesses with them. After Iowa passed similar legislation in the early 1990s, franchise system growth, and subsequent job growth, virtually ceased until the legislation was amended twice in subsequent years, and

Assembly Bill 2305 will add considerable legal expense. This bill will increase the cost of operating a franchise business in California. The bill is replete with legally actionable terms such as "good faith" and "duty of competence." These terms, either broadly defined or undefined, would require judicial involvement to resolve minor disputes, at great expense to both franchisors and franchisees. Franchisors would be forced to recognize franchisee associations and collectively bargain as though they were labor unions. The cost must be passed on to consumers and franchisees in the form of higher prices.

Alisa Harrison
IFA Vice President, Communications & Marketing

One of the early founders of the IFA, Bill Rosenberg, the power behind Dunkin' Donuts, explained why franchisors had formed the organization in 1960. At the time, franchisors were getting a black eye in the nation's media from stories by franchise owners in which "unscrupulous promoters and 'fast buck artists' were getting involved, often promoting their products with a celebrity's name," stated Rosenberg (quote from IFA's Franchising World magazine). "Businesses failed--there were foreclosures. Justifiably, the losers were contacting their legislators to complain. Federal and state legislators, who had little knowledge of franchising, lumped the entire industry together. We were going to be legislated out of business if we didn't act fast."

The group became one of the industry's top lobbyists, lobbying for some fifty years. The mission of the IFA's government relations department is to preserve and enhance the legislative and regulatory climate for its franchising members.

The association argues that specific laws that hamper franchisor conduct in the franchisor-franchisee relationship are unnecessary. The organization provides an ombudsman that helps boost honesty and trust in the industry.


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Staff reporter for Blue MauMau