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AUGUSTA, Maine – Maine's House of Representatives on Monday passed the Small Business Protection Investment Act LD 1458 by a vote of 75 in support and 60 against.
Franchise owners in Maine are pushing a law that they say will allow them to better hold onto their business equity. Under the act, franchisors would be required to provide a 60-day period for a franchise owner to cure a problem before it is terminated. Franchisors would prefer to be able to terminate a franchise on the spot in order to keep the brand pristine. The bill would also allow the reasonable right for a franchisee to pass their business on to their spouse, child or chosen successor. Franchisors want to keep their current right to sell the expiring franchise to whomever they want. They remind lawmakers that the franchise contract is written between an individual, not a family, and the franchising firm.
"There is no doubt that the Maine Franchise Owners Association has achieved a major victory for its members and for all Maine franchise owners," wrote the association's executive director Jim Coen to its members this afternoon. He asked Maine franchisees to contact him and their senator to support the bill. "We can use your help in the Senate," stated Coen.
The bill was argued back and forth on the floor of Maine's House of Representatives for nearly an hour. Representative Aaron Libby (R-Waterloo) stood up to argue, "I don't care if we are talking about drugs, prostitution or franchising. We should not get involved with contracts between two consenting adults."
Representative Jeff McCabe (D-Skowhegan) said that franchisors would not negotiate with franchisees about the bill so lawmakers had to step in. "Today we have come up with a compromise," he said about Maine's lawmakers amending clauses in the original bill. He also argued that 18 states had franchise relationship laws "to protect their citizens."
Both the opposition and supporters were bipartisan. Representative Andrew T. Mason, a Democrat from Topsham, opposed the franchise protection bill. He asked where the franchisee pain was, declaring that Maine's franchisees were indeed a happy lot. "Ninety-four percent of franchisees enjoy operating their franchise," he quoted from a marketing company.
The bill now goes on to the state senate for a vote, where it is likely to encounter tougher opposition.
The chief lobbyist against the bill was the International Franchise Association, a Washington-based lobbying group that was started in 1960 by a group of franchisors. The group was formed a few years after the success of the federal Automobile Dealer's Day in Court Act that protected car franchise owners. One of the IFA's founders, William Rosenberg, founder of Dunkin' Donuts, recalled for Nation's Restaurant News in 2001 the reason for the IFA's start. "When people got hurt and lost money in a franchise agreement, the first thing they did was to complain to their congressman or state legislator," said Rosenberg. He went on to say that these franchisees wanted to pass laws to make it difficult for franchisors to survive.
Supporters of the Small Business Investment Protection Act have told Blue MauMau that they counted over 35 lobbyists marching up and down the legislative halls to oppose the bill. When asked if there was any truth to those rumors or that the IFA had spent over $500,000 in lobbying against the state bill, the association did not respond. However, Matthew Haller did tell Blue MauMau why the IFA opposed the bill. "LD 1458 undermines the contracts upon which the franchising industry is based, compromising franchisor-franchisee relationships," said the IFA's vice president of government affairs. Haller threatens that franchisors may leave the Pine State. "If Maine adopts LD 1458, Mainers may no longer be able to own and operate a franchise business as franchisors choose to open corporate locations to protect their brand, or worse yet, leave the state altogether." He asks Maine's senate to reject the bill by voting for the house of representative's initial option to further study these franchising issues and their solutions. "Adopt the bipartisan Majority Report Resolve, which is a reasonable and measured step toward considering whether far-reaching and potentially harmful legislation regulating complex business-to-business franchise relationships is necessary," says Haller.
But after the house's approval of the Small Business Investment Protection Act, the option for further study, called the Majority Report, no longer remains in effect for the senate vote. Maine's senate will simply have a straight pass or no pass vote on the Act.
Maine Franchise Owners Association's Coen dismisses the IFA's warning that franchisors will not sell franchise licenses in the state. He stresses that capital flows where capital is welcome. He thinks franchisees will love investing in Maine. "The Maine house of representatives has voted to protect Maine, a state that welcomes and protects franchise investments," he says. But Coen adds that even when the bill was back in committee, lawmakers showed that they knew the state has a franchising problem. He points out that five on the Legislative Joint Standing Committee on Labor, Commerce, Research and Economic Development (LCRED) voted in favor of passing protections before it went to the floor of the house. And seven committee members voted that there were problems in franchising that warranted further study. "All totaled that means 12 out of 13 members of the LCRED agree there is a problem in franchising when it comes to equity protections," says Coen.
The spokesperson for the local franchisee association points out that if the bill is successful, a few of the troubled franchise systems will need to change. "It's no wonder Coffee News spoke out against the bill, since a hundred percent of its franchisees are terminated over a 5-year period. They won't be able to operate in the same manner ever again in Maine. That is good for prospective franchisees."