On Wednesday evening 10-1-2014, at a meeting of the New England Franchise Association, I served on a panel of four that discussed “Why is Franchise Relationship legislation popping up across the country?” There were three attorneys on the panel: Tim Bryant, Preti Flaherty, Portland, ME, Gregg Rubenstein, Nixon Peabody, Boston, MA; and Rory Valas, Valas Law, Boston, MA. The moderator was Suzanne Cummings, Cummings Law, Stoneham, MA.
The discussion was civil to a point and in particular Gregg Rubenstein did a good job questioning the validity of these laws and the problems they are supposedly trying to solve, he denied that a problem exists. Rory Valas also did a good job of articulating how “bad acting franchisors” take advantage of franchisees. He shared a number of common legal clauses that are unconscionable in that the outcome to franchisees is devastating. Rory informed the audience that the unconscionable franchise agreement clauses are not typically found in other business contracts. Often those business contracts are protected by common law, where franchise agreements are not.
Tim Bryant of Preti-Flaherty sounded more like an IFA lobbyist than an attorney. He stated false statistics as well as the unfounded claim that these laws are being introduced by “wealthy franchisees” that are funding these initiatives for their personal gain.
Not only was I astounded at his accusations. I also found his arguments to be ill-informed, false, hostile and provocative.
On the contrary, I tried to represent that collaboration and transparency to the transaction is the real need and that Independent Franchisee Associations can create leverage and obtain more balance than most laws can. With that said, basic laws can raise the bar for franchisors to treat franchisees with “good faith and fair dealing” and help attract more buyers that have turned away from franchising over the last 8-10 years.
The clip above is of Tim Bryant of Preti-Flaherty from Portland, Maine accusing rich franchisees of supporting a law in Maine only for their self-interests, which is far from the truth. The reality is a Franchise Relationship Law is not retroactive. It will not have an effect on existing franchise agreements. The law if enacted will only effect franchise agreements signed after the enactment of the law. So wealthy franchisee self-interest is a moot point. Besides dubious franchisors prey on the small franchisees who can’t afford to fight back.
The basic premise of these laws is that today’s franchise agreement do not allow franchisees to build, harvest or perpetuate their equity. In the clip below Tim Bryant correctly points out that under today’s franchise agreements the equity belongs to the franchisor. Franchisees, listen to what Tim Bryant says. He is speaking the truth, and I and other pro franchisee advocates have been telling you this for years.
That is exactly why state laws have been introduced nationwide to protect, enhance and defend franchisee equity. Fair franchise bills will continue to be introduced in state capitals nationwide.
Most franchisees feel that they do in fact deserve and do own the equity they have accumulated in their franchise. Many sell those franchises and reap most of the rewards, unless unscrupulous franchisors put their fingers in the franchisee’s cookie jar. But the International Franchise Association and most franchisors believe it is their equity and not the franchisees. It just is very seldom that one publicly admits