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National Chains Clash with Franchisees Over Maine Bill
05/08/2013   Reported By: Tom Porter

Franchisees of businesses such as McDonalds, Dunkin' Donuts and others crammed a legislative hearing room today to speak in favor of a bill that would give them broader control over the terms of their operating agreements. Representatives from the national chains challenged what they said was an assault on corporate integrity. A.J. Higgins has more.

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National Chains Clash with Franchisees Over Maine Listen
 Duration:
3:22

David Walck

The term "franchisee" is generic but the businesses that would be affected by a far-reaching bill before the Legislature's Labor, Commerce, Research and Economic Development Committee are household names to most Mainers.

"Burger King, MeinEke, Subway, Edible Arrangements, Buffalo Wild Wings, Dunkin' Donuts, Domino's, Little Caesar's, Seven-Eleven, Supercuts, Papa John's, Arby's," said David Walck, as he read off the list of the Maine franchisees who claim they're tired of being micro-managed by national and regional corporate bosses.

Walck (above right), who operates a Dunkin' Donuts franchise in Lincolnville, says the public has no idea the level of control that large franchisors can exert - like being forced to remain open during unprofitable hours and having product pricing set by the national headquarters.

Walck says all the rules can be changed at will by the corporation and the corporation can impose unfair restrictions on Mainers who want to invest in a business franchise.

"It can prevent a franchisee from transferring or selling their business to family members or others," Walck said. "Or prevent franchisees from associating freely that allows good faith and fair dealing, or block us from buying the same products from independent sources at lower prices."

Walck wasn't the only Dunkin' Donuts franchisee who's taken his complaints with the home office public. Robert Seavey, of Auburn, says Dunkin' Donuts shops are threatened by corporate changes that could endanger his franchises and dozens of jobs.

He and other partners operate a Dunkin' Donuts production facility in Lewiston. He says the $3 million bakery, and the 80 jobs it supports, could be jeopardized by corporate office plans to abandon fresh-baked donuts, replacing them with a defrosted product.

"This investment, if the franchisor were to go in that direction, would be closed and the $3 million and the 80 jobs that go with it in Lewiston, Maine would go away, and we would no longer have the quality product that we have today," Seavey said.

Disgruntled franchisees include more than doughnut makers. Larry Kohler and his son operate nine Burger King restaurants in southern Maine. He told committee members he would like to think he and other franchisees could pass their franchise on to their children, but some of franchise agreements allow the corporation to opt out under certain circumstances.

That concerned committee member Rep. James Campbell, a Newfield independent. "People buying up a franchise, or 15 franchises, and all of a sudden they can't turn them over to their children," he said.

"It's a concern of mine because I've heard that it takes place," Kohler said, "and I'm very interested, as my son is, in taking over the business and operating it."

Opponents maintain there are times when a family member may not be qualified to take over the business. Dean Heyl, of the Washington D.C.-based International Franchise Association says franchisors must be able to ensure brand integrity and consistency, and that many of the restrictive clauses in franchisee agreements are crafted for that purpose.

"What we're concerned about is that the folks who have bought in to a proven franchise system now are going to be faced with fellow franchisees who will not be complying with the agreements in those systems," he says. "And so that erodes the brand integrity because they won't be getting the consistent experience."

Heyl was joined by nearly a half-dozen other national franchise representatives in opposing the bill that will be worked by the committee later this month.

Photo: A.J. Higgins


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