January 31

Panel votes to seek study of protections for Maine franchisees

A bill calls for remedies on the grounds that some franchisors’ contracts are unfair, but others disagree.

By J. Craig Anderson canderson@pressherald.com
Staff Writer

A bill intended to protect franchisees in Maine from unscrupulous corporate franchisors will move to the House of Representatives with a recommendation that it be assigned to a committee for further study, a state legislative committee voted Thursday.

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Advocates for L.D. 1458 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.

AP File Photo

The Joint Standing Committee on Labor, Commerce, Research and Economic Development voted 7-3 in a work session to recommend appointing a seven-member committee to study whether the regulations included in the bill are necessary to keep franchise agreements fair. The preliminary vote could change today, as two absent committee members may cast late votes regarding the bill.

The recommendation for further study will accompany two “minority reports,” one recommending approval of the bill and another recommending denial.

Advocates for L.D. 1458, the Maine Small Business Investment Protection Act, 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.

They say contracts required by some franchisors have become patently unfair to franchisees, most of whom are small-business owners.

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.

The bill includes provisions that would make it more difficult for franchisors to terminate contracts for a variety of reasons, including a franchisee’s failure to meet sales quotas, refusal to participate in promotional campaigns, and deviation from pricing, menu and hours of operation determined by the franchisor.

Opponents of the bill, including the Washington, D.C.-based International Franchise Association, say the bill would force franchisors to accept one-sided contracts that only provide legal protections to franchisees.

It also would hurt consumers, they said, because a franchise owner could opt to sell only a limited selection of products or services, raise prices, or choose to operate during limited or inconsistent hours.

During Thursday’s work session, some lawmakers questioned whether the problems the bill was designed to solve actually exist. They also expressed concern that the bill, if enacted, would stifle economic development if major franchisors decided to stay away from Maine.

Rep. Amy Volk, a Republican from Scarborough, said the committee has heard repeatedly from people complaining about the same one or two franchisors, but that a far more diverse group of franchisees has spoken out in support of their franchisors and against the bill.

Not everyone on the committee agreed that the bill requires further study. Committee Senate Chairman John Patrick favored sending the bill to the House with a recommendation for approval, and committee member James Campbell Sr. moved for a recommendation of denial.

J. Craig Anderson can be contacted at 207-791-6390 or at:

canderson@pressherald.com

Twitter: @jcraiganderson

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