Franchise owners in Maine are supporting a bill going before a legislative committee Tuesday in Augusta that they say would prevent companies from terminating agreements with their franchise owners without warning, among other provisions.
Lobbyists representing corporate franchisors plan to attend the hearing of the Labor, Commerce, Research and Economic Development Committee to voice objections to L.D. 1458, the Maine Small Business Investment Protection Act.
Supporters of the bill say it will restore key protections to franchisees of companies ranging from Dunkin’ Donuts to Marriott hotels that have been stripped away over the past 20 years through changes to franchise agreements.
A franchise agreement is a legally binding contract between a franchisor, which licenses the use of its name and products, and franchisees, which own and operate individual businesses under the franchisor’s brand.
Steve Dubin, spokesman for the Maine Franchise Owners Association, said the number of franchises in Maine has decreased over the past decade from a high of about 4,200 to just 3,400 because of unfair franchise agreements.
For instance, he said, most contracts allow a franchisor to terminate its agreement with a franchise owner without warning or cause. They also allow franchisors to collect legal fees in lawsuits against franchisees, but not the other way around, Dubin said.
The bill would fix both of those problems and others, he said.
Dubin said franchisors with a reputation for having franchisee-unfriendly contracts include Quiznos, Cold Stone Creamery and the UPS Store. Prior to a recent management change, Dunkin’ Donuts was known for frequently taking its franchisees to court, he said, filing more than 350 lawsuits against franchise owners nationwide from 1998 to 2009.
Opponents of the bill, including the Washington, D.C.-based International Franchise Association, say it is unnecessary and would force franchisors to accept one-sided contracts that only provide legal protections to franchisees.
In an open letter to the committee’s Senate chairman, John Patrick, D-Rumford, and House chairwoman, Rep. Erin Herbig, D-Belfast, the association said the bill is “egregious” and goes far beyond similar franchisee rights laws in other states. At least 17 states have some form of franchisee rights law, it said.
The Maine bill would forbid franchisors to set business hours, opt not to renew a franchise agreement, or even help a struggling franchisee for fear of being accused of discrimination by other franchise owners, it said.
Businesses that operate under the franchise model in Maine span a wide range of industries, including fast-food restaurants, hotels, real estate brokers, cleaning services, moving companies, tax preparation and home health care.
Jim Coen, executive director of the Maine Franchise Owners Association, said Maine, Pennsylvania and New Hampshire currently have franchisee-rights bills pending, and representatives of six other states have contacted the national Coalition of Franchisee Associations recently about introducing similar bills.
“There’s basically a war going on between franchisees and franchisors on this issue,” Coen said.
J. Craig Anderson can be contacted at 791-6390 or: