The Maine Small Business Investment Protection Act, LD 1458, is making its way through the Maine Legislature. A vote in the House could occur as early as next week. I write today in support of the bill along with small-business owners in Maine who belong to the Maine Franchise Owners Association.
We own the franchised small businesses within Maine communities. We live in Maine, hire Maine workers, pay Maine taxes (on our homes and our stores), and play an important role in our communities by donating to local charities and sponsoring local events.
Intense opposition to the legislation is primarily funded and coordinated by powerful out-of-state special interest groups, including the International Franchise Association, an organization founded by franchisers — large billion-dollar corporations located in California and Illinois — not Maine small-business franchise owners. In fact, most franchisers pay no business taxes to the state of Maine.
Maine franchise owners support LD 1458 because it will strengthen franchising in Maine. LD 1458 will protect Maine’s small-business franchise owners in an industry that has tilted out of balance.
The bill, as amended by Sen. John Patrick, D-Rumford, co-chairman of the Legislature’s labor and commerce committee, was reported out of committee as the minority report. It contains four basic principles to protect small-business investment in Maine. Eighteen other states have some level of franchise protection legislation. Maine already has laws that protect auto, farm equipment and appliance dealers.
The four basic principles included in Patrick’s amendment and supported by Maine franchise owners are:
Transfer/survivorship — This is the right to monetize our equity at the end of the relationship with the franchiser especially when it comes to family members. That is, we want to pass on to our children the businesses we’ve worked so hard to build. Many franchisers do not include provisions within their franchise agreement for any succession planning to our own children, many of whom, like mine, have grown up working in the business. Seventeen other states have passed laws to protect this right.
Reasonableness and good faith — This is the right to require franchisers who do business in Maine to exercise good faith and act reasonably (a legal term) when dealing with Maine franchise owners. Sixteen other states have laws to protect against this abuse.
Cancellation, termination and nonrenewal unless for good cause — This is the right to preserve or harvest our equity, so it does not become the property of the out-of-state franchiser upon termination or nonrenewal within a reasonable cure period and that a default be for good cause. Seventeen other states have laws to protect against this abuse.
Jurisdiction — This is the right to request that a Maine judge require a case to be heard within the state of Maine. Small Maine family businesses cannot afford to mount a defense in a faraway state. Locating a trial outside of the state is a strategy often used by franchisers against small franchised businesses as a way to get what they want.
Again, these four safeguards will provide basic protection for all Maine franchise owners who invest in and live in Maine, employ Maine people, pay Maine taxes and support local charities.
And research shows that these protections are good for business.
A study by the International Franchise Association, “Economic Impact of Franchised Businesses,” shows that Iowa, one of the first states with franchise protection laws, actually outperformed adjacent states, as well as states nationally in the period studied from 2004 to 2007. In Iowa, franchised units grew 10 percent in that period; the adjacent states declined (by 5 percent); and nationally franchised units declined as much as 10 percent.
Franchisees that have equity protection will invest more. It’s common sense; investment capital always will go where it is welcomed and appreciated. And that’s good for Maine’s economy and good for Maine’s workforce.
In the end, the question is simple: Will Maine lawmakers support the large corporations outside our state or the small family business owners who invest in Maine and create jobs in Maine?
A “yes” vote for Patrick’s amendment to LD 1458 is a vote for Maine small businesses.
Ed Wolak is chairman Maine Franchise Owners Association, which represents Maine franchised small businesses.