News Briefs

“We showed legislators that franchisors and franchisees opposed the bill,” Haller continued, observing that representatives of both California franchisors and franchisees were scheduled to testify against it. “Once franchisees recognized the impact of SB 610, they carried the message to their legislators ' and this had a huge impact because legislators recognized that the bill was not designed for the betterment of consumers.”

The Coalition of Franchisee Associations (CFA) was one of several organizations that supported SB 610. “While we are disappointed in having the SB 610 delayed from the committee vote, we have to put it all into perspective,” Keith Miller, CFA chair, told FBLA in a written statement. “The bill is still active and has passed both the Senate and Assembly Judiciary Committees. It has also passed the full Senate. This will give us additional time to educate our legislators on the issues and allow us to rebut the scare tactics used by the opposition.”

Miller added that 712 individuals, mostly California franchisees, contacted the Assembly Committee on Business, Professions, and Consumer Protection to indicate support for the bill. “This is a great base for us to build on and remind our legislators that companies and associations don't vote, but individuals that live in their district do,” he said.

When asked about the reasons for the proliferation of franchise-relationship bills that have been introduced in legislatures in the last few years (see related story below), Miller responded: “It's quite simple ' franchisees want to protect their investments, whether that's through increased protections on terminations, renewals, transfers, sourcing of good, pricing and others '. We must remember that for franchising to grow, franchisees must invest. Our goal so to bring more balance into the industry so that franchisees feel comfortable to invest.”

New Franchise-Relationship Bill Proposed in PA

Pennsylvania legislators are now considering House Bill 1620, a franchise-relationship bill that would create far-reaching changes in how franchises are regulated in the state. The bill was proposed by Rep. Peter Daley (D-PA), a former Quizno's franchisee, and the bill is now in the Consumer Affairs Committee.

HB 1620 covers a broad range of franchise-sales practices and franchise-relationship standards. “Traditional common law doctrines have not evolved sufficiently to protect franchisees adequately from fraudulent or unfair practices in the sale and operation of franchised businesses, and significant contractual and procedural restrictions have denied franchisees viable legal recourse to protect their interests in the businesses,” the text of HB 1620 states. It later adds: “A franchisor that simply acts in compliance with the terms of its franchise contract with a franchisee is not necessarily dealing with its franchisee fairly and in good faith.”

Among numerous provisions, franchisors would be: required to conduct an “independent, certified” audit (at the franchisor's expense) of advertising and promotional fund expenditures within 60 days of receiving a franchisee's request; prohibited from mandating suppliers of any franchise goods or services, except under limited circumstances; bound by strict rules about encroachment from either a new franchise or a franchisor-owned outlet (backed up with a franchisee's right to sue for damages); and have very limited ability to enforce non-compete clauses on former franchises.

“It's a travesty,” said Dean Heyl, senior director of state government relations, public policy and tax counsel for the International Franchise Association. “We thought that the bill that was introduced in Maine was the worst ever, but this is much worse. It's a Frankenstein-type conglomeration of bad ideas. It's not put together coherently, and the implications would be devastating to franchising in Pennsylvania.”

No hearings have yet been set on the bill. Neither Rep. Daley nor a member of his staff returned phone calls from FBLA.

Franchise Relationship Law Tabled in CA Assembly

On Aug. 13, a committee of the California State Assembly withdrew consideration of a bill that would have significantly changed the regulation of franchises. SB 610 had passed the Senate in May ( see, “Is California's 'Good Faith' Franchise Legislation Necessary or Meaningful?,” in the July 2013 issue of FBLA), and it was scheduled for a hearing and a vote in the Assembly's Committee on Business, Professions, and Consumer Protection on Aug. 14. But one day prior to the hearing, Committee Chair Susan A. Bonilla withdrew the bill and cancelled the hearing after receiving indications from her fellow legislators that they would not support it. The bill will not be reconsidered during the current session.

“This is the result of two months of executing a grassroots campaign and lobbying legislators,” said Matt Haller, vice president of public affairs for the International Franchise Association. IFA opposed the bill, arguing that it would radically change the franchisor-franchisee contract.

“We showed legislators that franchisors and franchisees opposed the bill,” Haller continued, observing that representatives of both California franchisors and franchisees were scheduled to testify against it. “Once franchisees recognized the impact of SB 610, they carried the message to their legislators ' and this had a huge impact because legislators recognized that the bill was not designed for the betterment of consumers.”

The Coalition of Franchisee Associations (CFA) was one of several organizations that supported SB 610. “While we are disappointed in having the SB 610 delayed from the committee vote, we have to put it all into perspective,” Keith Miller, CFA chair, told FBLA in a written statement. “The bill is still active and has passed both the Senate and Assembly Judiciary Committees. It has also passed the full Senate. This will give us additional time to educate our legislators on the issues and allow us to rebut the scare tactics used by the opposition.”

Miller added that 712 individuals, mostly California franchisees, contacted the Assembly Committee on Business, Professions, and Consumer Protection to indicate support for the bill. “This is a great base for us to build on and remind our legislators that companies and associations don't vote, but individuals that live in their district do,” he said.

When asked about the reasons for the proliferation of franchise-relationship bills that have been introduced in legislatures in the last few years (see related story below), Miller responded: “It's quite simple ' franchisees want to protect their investments, whether that's through increased protections on terminations, renewals, transfers, sourcing of good, pricing and others '. We must remember that for franchising to grow, franchisees must invest. Our goal so to bring more balance into the industry so that franchisees feel comfortable to invest.”

New Franchise-Relationship Bill Proposed in PA

Pennsylvania legislators are now considering House Bill 1620, a franchise-relationship bill that would create far-reaching changes in how franchises are regulated in the state. The bill was proposed by Rep. Peter Daley (D-PA), a former Quizno's franchisee, and the bill is now in the Consumer Affairs Committee.

HB 1620 covers a broad range of franchise-sales practices and franchise-relationship standards. “Traditional common law doctrines have not evolved sufficiently to protect franchisees adequately from fraudulent or unfair practices in the sale and operation of franchised businesses, and significant contractual and procedural restrictions have denied franchisees viable legal recourse to protect their interests in the businesses,” the text of HB 1620 states. It later adds: “A franchisor that simply acts in compliance with the terms of its franchise contract with a franchisee is not necessarily dealing with its franchisee fairly and in good faith.”

Among numerous provisions, franchisors would be: required to conduct an “independent, certified” audit (at the franchisor's expense) of advertising and promotional fund expenditures within 60 days of receiving a franchisee's request; prohibited from mandating suppliers of any franchise goods or services, except under limited circumstances; bound by strict rules about encroachment from either a new franchise or a franchisor-owned outlet (backed up with a franchisee's right to sue for damages); and have very limited ability to enforce non-compete clauses on former franchises.

“It's a travesty,” said Dean Heyl, senior director of state government relations, public policy and tax counsel for the International Franchise Association. “We thought that the bill that was introduced in Maine was the worst ever, but this is much worse. It's a Frankenstein-type conglomeration of bad ideas. It's not put together coherently, and the implications would be devastating to franchising in Pennsylvania.”

No hearings have yet been set on the bill. Neither Rep. Daley nor a member of his staff returned phone calls from FBLA.