February 21, 2014
Dear Maine Franchise Owners,
I am writing to you as the Chairman of the Maine Franchise Owners Association “MFOA”. We represent Maine franchised small businesses. Most are owned and operated by Maine families.
MFOA supports the Minority Report, Senator Patrick’s amendment to LD 1458 to strengthen franchising, not harm or limit it. We all make our living in franchising; damaging it would diminish the value of our investments. However, we see an industry that has tilted out of balance.
Intense opposition to our bill is primarily being funded and coordinated by powerful out of state special interest groups including the International Franchise Association (IFA), an organization that purports to represent the franchise industry but in fact was founded by Franchisors, not Maine small business Franchise Owners. Additional opposition has been mounted by major franchisor branded systems, many whom generally practice but often times fail to follow the four basic safeguards we seek protection for.
In its present form, the Minority Report, Senator Patrick’s amendment to LD 1458 is nothing close to the original bill. Currently there are 18 states with some level of franchise protection legislation, many of those with the protections we are asking for. Beware of the IFA’s attempts to wander from the below described REASONABLE protections. They are:
- Transfer/Survivorship – The right to monetize our equity at the end of the relationship with the franchisor especially when it comes to family members. We respect and appreciate the need for Franchisors to protect brand integrity. We understand that reasonable Franchisor qualifications and standards for proposed transferees, including for spouses, sons or daughters are necessary. We agree that a designated family member should not succeed the Franchise Owner if there is good cause for refusal to honor the succession on the part of the Franchisor. That’s correct; currently many Franchisors do not include provisions within their franchise agreement for any succession planning to our own children. 17 states have passed laws to protect against this abuse.
- Reasonableness And Good Faith – The right to require Franchisors who do business in Maine to exercise good faith and act reasonably (a legal term) when dealing with Maine Franchise Owners. 16 states have laws to protect against this abuse.
- Cancellation, Termination and Nonrenewal unless for Good Cause –We seek the right to preserve or harvest our equity so that it does not become the property of the out of state Franchisor upon termination or non-renewal within a reasonable cure period and that a default be for good cause. 17 states have laws to protect against this abuse.
- Jurisdiction – The right to request that a Maine judge require a case to be heard within the state of Maine. Small Maine family businesses can not afford to mount a defense in a far away state. Most Franchisors use this as a means to get the small business owner to capitulate to their whims.
I would never defend Franchise Owners who are either unwilling or are incapable of maintaining Franchisor standards. I am speaking for those who work hard, maintain all franchise standards and are still treated unfairly.
You have afforded auto, farm equipment and appliance dealers fair franchising legislation over the years. Maine Franchise Owners need similar protections. These four safeguards will provide BASIC protection for all Franchise Owners who invest and live in Maine, pay the bills, employ the people, pay the taxes and borrow the money while putting their families’ life savings at risk via personal guarantees. Maine Franchise Owners are the ones who support local charities. Not the large BILLION dollar out of state Franchisors who abuse their power, are often predatory, intimidate Franchise Owners into submission, don’t own a thing in Maine and don’t employ any Mainers.
It seems so simple that Franchise Owners of working Maine families be afforded the above basic safeguards. I generally am opposed to laws and regulations that hamper businesses. However, I do see the need for consumer protection laws as they are necessary to protect your citizens from the bad Franchisors. During recent years, many Maine bankrupt Quizno’s, Tim Horton’s, Ben & Jerry, Stone Cold Creamery and other Franchise Owners (at least one who committed suicide) have been forced to sign Franchisor General Releases including an accompanying Disclosure Agreement prohibiting any public discussion in exchange for being “allowed” by their franchisor to sell their franchise for a fraction of its real value so the Franchisor can FLIP the business for large financial gains. Leverage such as this force Franchise Owners to bend to every Franchisor’s whim or else be threatened with non-renewal — even though they always maintained all franchisor standards.
Presently, unlike when we purchase a house or security in Maine, there are NO safeguards for franchised small businesses. Except for franchising, I can’t think of another industry where lawmakers allow its citizens to invest $200,000+ each without basic safe guards. I often wonder, in a state that is primarily dominated by small businesses, why any member of the Maine legislature would want to be on record as opposed to any of these rights that we Americans hold so sacred.
In most cases, Franchise Owners, as a class, are the biggest investors in a brand. Mainer’s need relief. We’re your neighbors and constituents. Not the out-of-state IFA or Franchisors. It is the Franchise Owners who support their communities, create jobs and pay taxes in Maine. In fact, for tax purposes, most Franchisors pay no business taxes in this state.
Contrary to what our opposition claims, the franchise world will NOT end if these five basic safeguards become law. In fact, according to the IFA’s own Economic Impact Report, those 18 states with franchise protection actually outperform those without. Other states such as California have many more franchise protection laws than Maine yet they have more Franchise Owner investments per capita than any other state. Investment capital will always go where it is welcomed and appreciated.
Unlike franchisor Executives of BILLION dollar corporations, working Maine Franchise Owners are mostly small generational family investors. Presently Franchise Owners who adhere to brand standards and honor their obligations can only watch their equity evaporate as the end of their franchise term nears. Without reasonable assurances of renewal our family businesses essentially become rent-a-businesses and are worthless to anyone except the Franchisor. Franchise Owners are often presented with one of two options; Sign a more draconian new form franchise agreement or walk away from their life’s work and family’s business equity. Choosing the latter allows the Franchisor to assume control, sell a new franchise to a new Franchise Owner and pocket the former Franchise Owners business equity.
Without BASIC safeguards for Transfer/Survivorship, Reasonableness and Good Faith, Cancelation/Termination, Non-renewal unless for GOOD CAUSE and Maine Jurisdiction Maine Franchise Owners lack the ability to sell and retire on their hard earned business value or transfer their business to a QUALIFIED spouse, son or daughter in many brands…….and that is the way many (not all) Franchisors like to have their thumb on Maine Franchise Owners.
Once a Franchise Owner becomes knee deep into a particular franchise system, without these BASIC protections, a Franchisor can mistreat and intimidate an average small Maine franchise owner into signing just about anything with impunity.
In the end, the question is simple, are you going to support the large corporations outside of our state, or the small family business owners who have invested and created jobs in your districts?
For your convenience here is a link to the bill and respectfully ask for your support of the Minority Report, Senator Patrick’s amendment to LD 1458.
Maine Franchise Owners Association