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Jim Coen January 9, 2015 Leave a Comment

Franchising Could Change Forever…

Image credit: Keoni Cabral | Flickr

Image credit: Keoni Cabral | Flickr

Jason Daley writes in Entrepreneur Magazine that legal issues could change franchising forever.

He writes:

Franchising usually makes it into the mainstream press when Taco Bell jams a new snack chip into its burritos. But in the past year, franchising has been making front-page news for other reasons: Several issues that have been simmering for years came to a head, pitting franchisors against franchisees and labor advocates against both.

The results of those conflicts—and their ultimate consequences for franchising as a whole—aren’t at all clear, obscured by hyperbole, legalese and a lack of guidance from regulators. Whether these issues will reshape franchising for the better, as some argue, destroy franchising as we know it—or change nothing at all—remains to be seen. Whatever the case, the legal and political fights are worth watching.

I was interviewed for this article well over 8 months ago and forgot about the interview until it popped up in my google alerts.

At the time I was the Executive Director of the Maine Franchise Owners Association (MFOA) currently I serve as a member of the MFOA Board of Directors.

“What’s happened is that over the years, attorneys for franchisors have tightened franchise agreements to the point where franchisees don’t really own any equity in their business,” explains Jim Coen, executive director of the Maine Franchise Owners Association, which supported the bill in Maine. “When push comes to shove, in most franchise agreements franchisees don’t have anything but the equipment they buy. They have no right to the name, to their customer base, and because of noncompete clauses they can’t use the skills they’ve learned. Yet franchising sells units by telling people they can be in business for themselves.”

Later on in the article I was also quoted as saying:

Coen of the Maine franchise owners’ group agrees that the minimum-wage movement is about union power, but he believes it also ties into fair franchising legislation and helps explain why the SEIU supported SB 610 and other franchising acts that improve franchisee equity. “The unions realize that if they can help franchisees increase their margins, then the franchisees can pay their employees a higher wage,” he says. “And I really think franchisees will pay higher wages instead of pocketing that income. The customer service experience at the counter is so important, franchisees want the best people they can get. The ones making minimum wage are cleaning tables or in the back. Franchisees shouldn’t be afraid of unions. They should be worried about protecting their equity.”

In the last sentence of my quote what I meant to say or thought I said was “Franchisees shouldn’t be afraid of the minimum wage. They should be worried about protecting their equity”.

Not a big difference but an important one.

Read More…

 

 

Filed Under: Fair Franchising Legislation, Franchising Tagged With: Balanced franchising, equity extraction, extortion, extraction, Fair franchising legislation, franchisee, Franchisee Trade Associations, franchisees, Franchising, franchisor, Independent Franchisee Associations, state legislation

Jim Coen October 16, 2014 Leave a Comment

States Offer Equity Protection regardless of “No-Equity Contracts” That Bryant Uses.

From Left to right, Tim Bryant, Greg Rudenstein, Jim Coen, and Rory Valas

From Left to right, Tim Bryant, Greg Rudenstein, Jim Coen, and Rory Valas

At the last the New England Franchise Association meeting, Tim Bryant of Preti Flaherty stated that franchisee equity was not part of the franchise deal. Tim claims a franchisee leases a franchise and the franchisor controls the equity. That statement is very true for most franchisors and franchise agreements except in states that offer some protections for franchisees.

The basic premise is that today’s franchise agreement do not allow franchisees to build, harvest or perpetuate their equity. Tim Bryant correctly points out that under today’s franchise agreement equity belongs to the franchisor. Listen to what Tim Bryant says, he is speaking the truth of franchising’s dirty little secret, the IFA and dubious franchisors have been avoiding this secret for decades. I and other pro franchisee advocates have been telling you this for years.

There are a number of ways that franchisors can extract equity from franchisees, and franchisor attorneys have been adept at changing the language in franchise agreements to attempt to circumvent the state’s law.

There are some states that offer franchisees a degree of protection to franchisees that choose to invest in a franchise in that state. My advice to anyone looking to invest in a franchise is if the franchise agreement does not allow you to build, harvest and perpetuate your hard earned equity than you should not invest in that franchise. The only other option is to invest in a State that offers protection for franchisees.

I have listed the States with franchise protection laws and the protections that those states offer. These laws will not prevent franchisors from extracting your equity if that is their intent, but these laws curtail some of the approaches dubious franchisors often take to extract equity.

Washington: Freedom of Association with no retaliation or retribution, discriminatory treatment prohibited, no unreasonable standards of performance, freedom of sourcing, no undisclosed kickbacks, exclusive territory protection, no Litigation out of the State of Washington, fair and reasonable price for goods sold to the franchisee, transfer fee limited to expenses incurred by the franchisor, 30 days notice of termination, 30 day cure period, good cause required, 360 days for franchisor to issue notice of intent not to renew.

Indiana: Discriminatory treatment prohibited, freedom of sourcing, no undisclosed kickbacks, exclusive territory protection, no unreasonable non-compete, no unilateral substantial modification of agreement, mo limits on Litigation, no unlimited advertising contributions, 90 days notice of termination, good cause required, 90 days Franchisor Notice of intent not to renew.

Hawaii: Freedom of association with no retaliation or retribution, discriminatory treatment prohibited, no unreasonable standards of performance, freedom of sourcing, no undisclosed kickbacks. exclusive territory protection, reasonable notice of termination, cure period 60 Days, good cause required, franchisor notice of intent not to renew within a reasonable time.

Minnesota: Freedom of Association with no retaliation or retribution, discriminatory treatment prohibited, no unreasonable standards of performance, exclusive territory protection, no unreasonable non-compete, 90 day notice of termination, good cause required, 60 days cure period, 180 days franchisor notice of intent not to renew.

Illinois: Freedom of Association with no retaliation or retribution, discriminatory treatment prohibited, 30 day notice of termination, good cause required, 30 days cure period, 180 days Franchisor Notice of intent not to renew.

Nebraska: Freedom of association with no retaliation or retribution, no unreasonable standards of performance, 60 day notice of termination, good cause required, 60 days franchisor notice of intent not to renew.

New Jersey: Freedom of Association with no retaliation or retribution, no unreasonable standards of performance, 60 day notice of termination, good cause required, 60 days franchisor notice of intent not to renew.

Rhode Island: Freedom of association with no retaliation or retribution, 60 day notice of termination, 30 day cure period, good cause required, 60 day franchisor notice of intent not to renew. 30 day renewal cure period.

Wisconsin: Good cause required for change in competitive circumstances, 90 day notice of termination, 60 day cure period, good cause required, 90 day franchisor notice of intent not to renew. 60 day renewal cure period.

California: Freedom of association with no retaliation or retribution, 30 day notice of termination, 30 day cure period, good cause required, 180 day franchisor notice of intent not to renew.

Iowa: Freedom of association with no retaliation or retribution, freedom of sourcing, 30 day notice of termination, good cause required, 30 day franchisor notice of intent not to renew.

Michigan: Freedom of association with no retaliation or retribution, no litigation outside the State, 30 day notice of termination, good cause required, 30 days franchisor notice of intent not to renew.

Connecticut: Minimum 3 Year term, and 3 Year renewal, 30 day notice of termination, 30 day renewal cure period, good cause required, 180 days franchisor notice of intent not to renew.

Most franchisees feel they do deserve to own the equity they have accumulated in their franchise. Many sell those franchises and reap most of the rewards, unless dubious franchisors put their fingers in the franchisees cookie jar. The IFA and most franchisors believe it’s their equity and not the franchisees. It just very seldom that one admits it especially an Attorney member of the IFA.

Filed Under: Fair Franchising Legislation, Franchising, Franchisors Tagged With: Balanced franchising, equity extraction, Fair franchising legislation, franchisee, franchisees, Franchising, franchisor, state legislation

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