Four States Want to Give Franchise Owners More Power

Lawmakers in California, Maine, Massachusetts and Pennsylvania are looking to provide more leverage to franchise retailers.

October 02, 2013

SACRAMENTO, Calif. – Franchise owners in Pennsylvania, Massachusetts, Maine and California might have more power if new legislation passes in their respective state legislatures, the Wall Street Journal reports. The bills, which vary from state to state, would allow franchise owners the right to join franchisee groups and would make renewing agreements under current terms easier.

For example, Maine’s LD 1458 — the most comprehensive overhaul— would allow franchisees to shut their doors between the hours of 10 pm and 6 am, price their own products and services, and renew licenses without paying more royalties or new fees.

While most agree that these bills probably won’t pass this year, the meat of the legislation is more far-reaching than previous attempts. “Franchisers have been selling franchises to more sophisticated and wealthy investors, and many franchisees these days own multiple units or even own multiple units across multiple brands,” said Kevin Adler, editor of the Franchising Business & Law Alert. “They are demanding what they see as equitable treatment, and if they don't get it, sometimes they are turning to legislative solutions.”

Profit margins are driving more franchisees to seek this kind of legislation, said Keith Miller, who chairs the Coalition of Franchisee Associations. Many franchisers are asking for more money from each store, which translates into less for the franchisee owner. These are “franchisees that have worked for years to build their investments and are fearful of those investments being wiped out or reduced in value,” said Miller.

Those opposing the bills say such legislation isn’t necessary because the Federal Trade Commission already regulates such agreements. “Most of this legislation is an attempt to rewrite the contract between the franchisee and franchiser that governs their business relationship and that both parties have entered into,” said Steve Caldeira, president and CEO of the International Franchise Association. “Franchisers and franchisees who are upholding the terms of their contracts will unfortunately be negatively affected, as will consumers, as these bills would effectively allow franchisees to avoid contractual requirements while still using the franchise brand.”

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