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AUGUSTA, Maine – The Maine state legislature's Joint Standing Committee on Labor, Commerce, Research and Economic Development approved on Thursday the Small Business Protection Investment Act LD1458, which passed on to the House floor for debate.
Franchise owners in Maine are pushing a bill that obligates franchisors to exercise good faith in their dealings with franchisees, to provide a 60-day notice to cure a problem before a franchised business is terminated, and to allow the reasonable right for a franchisee to pass their business on to their spouse, children or chosen successor. In short, the bill focuses largely on franchise owners being able to hold onto their business equity. Franchisors would prefer to be able to terminate a franchise on the spot.
Opponents were not able to stop the bill.
"We are very pleased with the fact that Senator John Patrick's amended Bill 1458 has reported out of the Labor, Commerce, Research & Economic Development Committee on to the House of Representatives to be voted on," says Jim Coen, executive director of the Maine Franchise Owners Association. "This law is good for franchise owners. It's good for Maine and for the economic development of the state."
More bill options, study group
"The vote was a mixed bag, but at least we are on to the House," says Mr. Coen.
He is referring to the fact that the Committee gave the bill a divided report, a procedure that has confused some into thinking that the outcome is solely to study the bill. It isn't. Bill LD 1458 will now be introduced to the floor of the House. A state senator's office explained to Blue MauMau that a divided report of pass the bill or study the problem more accurately gives the legislation's sponsor, Representative Erin Herbig (D-Belfast), more options. Representative Herbig will want a straight up or down vote in the House of Representatives on her own bill. But if the House were not to have enough votes to pass it, the sponsor could then offer the Committee's other request for an independent study by the legislative body and governor's office as a second choice. That study could then be voted on and conducted before another vote on LD 1458 is held. However, it should be pointed out that it is uncertain if the House would be willing to spend public funds to research the scope of franchise abuse in Maine and the bill's impact on it.
For and against
Corporate lobbyists fiercely opposed the bill and objected to the splitting of franchise owners and franchisors. They asked why individual franchisees couldn't simply negotiate issues of business succession and termination in their contracts if they really want it, rather than legislate it for all.
Keith Miller, chairman of the Coalition of Franchisees Association, thinks that line of thinking is a canard. "It would be great if all franchisors included language in their contracts for renewals and transfer rights that were also beneficial to franchise owners," he says. "Unfortunately, that is often not the case, and for people to imply these terms are negotiable to most franchisees is just fantasy." Formed in 2008, Miller's Washington-based association is made up of franchise owners from some of America's largest franchise brands. "Unless you are a major player in the brand, franchise agreements are not negotiable. It seems the only way to protect and preserve franchisee equity throughout the industry is passing legislation." Miller tells of the theft of small businesses by franchising corporations and its dampening effect on Maine's small business investors. "Without these protections, many franchisors will continue to transfer the franchisees' equity to their balance sheet. Long term, this is a bad strategy for the franchise industry as franchisees will be less likely to invest," says the franchisee association chair.
Matthew Haller, vice president of public affairs for the Washington-based International Franchise Association, does not think the state has a franchise theft problem. His organization spent considerable effort, money, personnel and public advertisements in Maine to block the bill. But where the IFA's efforts had been successful in tabling this bill last July, this time around the amended bill will now move on despite the Washington lobbyist's strenuous efforts to oppose it. "IFA and the business community in Maine believe the Maine economy would be negatively impacted by this bill, which is a solution in search of a problem that doesn't exist in franchising," says Haller to Blue MauMau.
Haller is grateful to those who supported the IFA. "We appreciated the opportunity to bring Maine franchisors and franchisees together to educate legislators about the economic impact of franchising," he says.
The bill is expected to come before the House of Representatives for a vote prior to mid-April.
Coen is grateful to Maine's franchise owners and their support. He adds that Maine franchise owners had an opportunity the night before the Labor Committee vote on the bill to meet and speak with some 60 state legislators at a get-together that the Maine Franchise Owners Association organized. "I now look forward to meeting the members of the House. I want to thank them," says Coen.