In 1994, Legislative document 1916, or as some people remember it — The Franchise Practices Act, was shot down by Governor John R. McKernan, Jr. even after it passed both the Maine House of Representatives and the Maine Senate.
Leonard Kovit, owner of 5 Meineke’s in Maine and New Hampshire in 1994, remembers the bill clearly.
“Several of us — KFC, Meineke, Arby’s, DQ, and Dunkin’ Donuts, — joined forces back then, but ultimately weren’t successful in getting the bill passed. I remember there being tremendous testimonies, but there was just enough opposition that it didn’t pass,” Kovit recollects. “Franchisees today are still fighting the same exact problems we were fighting 20 years ago. Back then franchisors believed that if they weren’t stealing franchisee’s money, they were not doing it right. It seems not much has changed in 20 years. Franchisors are still too powerful. As a franchisee it’s hard to protect yourself against them, if the franchisor wants you out or they want your location they can take it from you very easily,” he adds.
Susan Kezios, President American Franchisee Association, remembers it being a very fast veto. “When it was vetoed, I remember writing an article calling it the fastest veto in Maine history. Within two hours of reaching Governor McKernan’s desk it was vetoed. It was like he was waiting for it,” Kezios states.
“There was just so much grit, and passion, not to mention time, money and effort that so many people were putting into franchise bills all across the United States, including Maine. I can’t stress that enough,” Kezios remembers.
Kezios goes on to say there were easily 100 to 200 franchise owners in the room when testifying in hearings. “I really think it was the transfer issues that spoke to the government officials. They felt franchise owners should be able to give the franchise they own to their families at any given point in time.”
“Iowa is where everything really started,” Kezios stresses. “In order to understand what it was like at the time, you really have to understand the climate of franchising,” Kezios continues. “In 1992 Iowa started it all when they passed the Iowa Franchise Act. It became a very active time. In 1993 to 1994, 58 different franchise enactments amended different franchise laws in many, many different states. The franchisors actually boycotted Iowa, in an attempt to hurt states that enacted franchisee protection laws, they also pushed back on the franchisees involved, that boycott fizzled out in a few years, the pushback continues. In Maine, it was the KFC franchise owners who really picked up the ball because their 20 year franchise deals were coming up.”
Kezios recollects in 1994 she was visiting dozens of states, multiple times, including Maine. “I remember one time we were flying into Maryland, and the weather was so bad that they were shutting everything down. I just remember having the lawyer I was with at the time talk until the very last minute when they shut the lights off. In Maine I remember franchisors and franchisees sitting on opposite sides of the hallway outside the governor’s office. It was an intense experience.”
The Franchise Practices Act was introduced by Representative Hoglund of Portland. According to the bill, “Many franchises reflect an imbalance of contractual power in favor of the franchisor, and fail to give due regard to the legitimate business interests of the franchisee, as a result of the franchisor’s reserving pervasive contractual rights over the franchise relationship. Franchisees may suffer severe financial losses when a franchisor does not act in good faith, or with due care.” The bill goes on to say “It is the purpose of this bill to promote greater fairness and equity in franchise relationships; to establish minimum standards of conduct in franchise practices; to strengthen private remedies against fraudulent or unlawful actions; and to provide consumers the greater benefits that would flow from equitable franchise relationships.”
This act highlighted many amendments including damage to public; restrictions on independent sources; coercion involving deliveries and order; coercion involving advertising; coercion involving contractual agreements; coercion involving restricting participation in other business; restrict franchisee’s right to association; terminations, cancellation and nonrenewal; encroachment; transfer of franchise; survivor-ship; duty of good faith; remedy for civil action; notice form, delivery, and content; choice of law; construction with other law; public policy; and statute of limitation.
According to Jim Coen, Executive Director Maine Franchise Owners Association, there were at least 10-15 states that passed franchise protection legislation in the 1990’s.
“I wish Maine was one of those states. For example, Iowa was one of those states, and since 2004 (10 years), Iowa has gained 10% more franchised units. While in Maine, franchised units have declined an estimated 20% during that same time period. That is a 30% swing, LD 1916 if it was passed could have saved Mainers tens of millions of dollars in franchisee losses as well as encouraged more franchised businesses to come to Maine. There is no doubt that franchise owners will invest in States that offer equity protections,” Coen stresses.
“The differences in the two bills, 20 years apart, at this point is significant,” Coen goes on to say. “The original bill, which was filed early in 2013, followed the Universal Franchisee Bill of Rights, it was very similar to its 1994 counterpart. Since that time, in an effort to win bipartisan support, many clauses were removed from the original piece of legislation.”
According to Coen, the Maine Small Business Investment Protection Act has been reduced to four key principles, all of which were included in the 1994 Franchise Practices Act. These principles include: Transfer/Survivorship rights, Reasonableness & Good Faith, Cancellation, Termination & Nonrenewal unless for Good Cause, and Jurisdiction.
According to Kezios, it took so long for another bill to come about because life intervenes. “There is so much money, passion, effort, and drive needed to even get something to the Governor’s desk. So much constant pressure needs to be exerted. Franchisors get smart, and franchise owners get satisfied with small things. Then you get tired, run out of money and steam. Franchise owners really need to have their backs up against the wall before they will want to change something. Hopefully that time has come with LD 1458, the Maine Small Business Investment Protection Act. I wish them the best, and hope it gets to the Governor’s desk again and this time he signs it.”