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CFA Supports Florida Protection Bill for Franchisees, IFA Opposes

Two Florida state Republican legislators, Senator Jack Latvala (District 16) and Representative Jason Brodeur (District 28), unveiled a bill today that is aimed at protecting franchise owners. Called the Protect Florida Small Business Act, state Senate Bill 750 aims to protect Florida franchise owners from capricious closings of their franchised businesses without cause or even warning by the franchisor.

“As a legislator, I want to continue to make sure Florida has the most business-friendly climate in America. As a chamber of commerce president, I’m particularly sensitive to the threats against small business owners from out-of-state companies.” said Representative Brodeur (R-28). “I want to be sure that there is a level playing field for all business owners in Florida, whether they are a small independent shop or a franchisee.”

The International Franchise Association (IFA), a national association that was created by franchisors in 1960 to lobby on their behalf, opposes the bill to protect the assets of franchised businesses. In an email to members, the IFA’s senior vice president of communications and public affairs, Matt Haller, asserts: “Despite the bill’s misleading title, the legislation appears to be a mirror image of some of the legislation IFA has defeated in recent years in California, Maine and Pennsylvania and would do massive and irreparable harm to franchising in Florida.”

That view is not shared by the Coalition of Franchisee Associations (CFA), an organization that represents 41,000 franchisees in some of America’s largest franchise brands.”The basis of this bill is from California’s successful AB-525,” asserts Keith Miller, chairman of the CFA.

Miller thinks the IFA is using the same rhetoric to oppose this bill that they do for all other franchise protection bills. But Miller points out that this bill is different.

“Much of the language used in the Florida bill is taken from California AB-525, which was signed into law in 2015,” points out the CFA’s chairman. “That bill was the result of compromise language between the CFA and IFA, which ensured protections for all parties.”

Franchisee Miller and the CFA should know. The association, which solely represents franchisees’ collective interests, has been deeply involved in the various California and Pennsylvania franchisee protection bills that Haller refers to. But Miller says the Florida bill most closely mirrors the successful California Assembly Bill 525, which the state senate and assembly unanimously passed and California’s Governor Jerry Brown then signed into law in 2015.

The IFA seemed comfortable with that bill, which was drafted and supported by the Coalition of Franchisee Associations. The IFA thought the bill would create a good environment for franchisees and franchisors. “AB 525 represented years of work by the IFA and put to rest a major issue in California, marking a more certain path forward for franchisees and franchisors in the state,” said IFA Director of State Government Relations and Public Policy Jeff Hanscom in the IFA’s February 2016 edition of Franchising World.

The IFA is pushing the thought with its members and legislators that the bill was sparked by a few disgruntled franchisees. “Based upon intelligence IFA’s state government relations director Jeff Hanscom has been gathering in Tallahassee, the bill is the result of a small group of franchisees seeking to generate leverage with brands for concessions in ongoing contract negotiations,” wrote Haller in an email to IFA members today.

In reality, the Coalition of Franchisee Associations has been behind the scenes helping to not only draft the bill, but also work with Florida franchisees and lawmakers to introduce it.

“We’ve been working on this bill for at least half a year,” said Miller, who is also a franchisee. “It’s been in the works for a long time.” The CFA chairman asserts that this is a good bill for franchisees and hopes other Florida franchisees will join in to support its passage by registering on a web site, ProtectFLBusiness.com. He and his organization applaud Senator Latvala and Representative Brodeur for sponsoring the Protect Florida Small Business Act. “Increasing the protections for these local businesspeople creates an environment that gives incentive for future investments,” said Miller.

“More than 400,000 jobs in Florida are directly tied to the hard work and efforts of franchised small business owners,” said Senator Latvala, the bill’s senate sponsor. “Currently these small businessmen and women have no real protection if the national corporation drops them as a franchise holder. This is not a level playing field. This is wrong and it must change.”

This article was originally posted on Blue MauMau.

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Will Predictive Schedule Mandates Work?

By Rob Branca

Predictive scheduling mandates require employers to have perfect advanced knowledge and employees to act perfectly. It seeks to legislate an impossible result, every minute, every hour, every day. No business can perfectly predict how many customers will come in the door or what they will order. It is very difficult to predict needed staffing and inventory, which is only one reason that more businesses fail than succeed.

Is there any workplace on Earth that knows in advance how many customers will come in, and what they want? The closest place is perhaps an airport. To understand why these laws are seeking to legislate the impossible, one merely needs to have been stuck in a long, snaking airport security line anxiously wondering if you will make your flight.

Airports are perhaps the only place of business where multi-billion dollar employers (airlines and federal and state government agencies) know the exact number of customers that will arrive, exactly who they are, what luggage they will be bringing to process and when they will arrive. They know this mostly for months in advance. Yet, even with the perfect advance knowledge that a fortune teller would admire, they still are unable to get it right, with TSA being nicknamed “Thousands Standing Around.”

Sure, airports suffer all the same unknowable circumstances that other businesses do: bad weather, who might call in sick, who might not show up without calling, water main breaks, construction delays, equipment failures, and human error, just to name a few.  However, one of the largest unknowable factors in business is absolutely, undeniably known to airports: how many customers are coming and how many people are needed to serve them, exactly when, in advance.

If multi-billion dollar companies with extremely sophisticated data systems, analysts and advance reservations from their customers often cannot get it close to right, how do proponents of punitive predictive scheduling mandates like those enacted in Seattle expect a burger joint to be perfect? They don’t. They are seeking fines and large class action legal fees, not employee stability. They are intended to punish employers for not knowing the unknowable. Businesses cannot possibly comply with these poorly drafted laws.

This is not to say that employers ever want to overburden their people with wildly unpredictable hours or work closing and opening shifts within mere hours. Quite to the contrary; a simple, recurring schedule is the easiest and least expensive to manage for a business and provides well rested, happy employees who have had the opportunity for a full night’s sleep, healthy meals, and quality family time. That is the employee that an employer wants to be greeting its valued customers. Punitive predictive scheduling in the forms currently enacted and proposed simply is not possible, even for the closest to perfect fortune tellers among us. There has to be a better way.

Most businesses fail for a multitude of reasons, among them failing to survive the unpredictable. We must not let legislatively mandated punishment for the inability to know the unknowable be another reason. These inept laws are already on the books in a few cities, and are being proposed in numerous other cities and states.

Please contact your local chamber of commerce and any trade organizations to which you belong and share these points.

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CFA Opposes Joint Employer While Addressing Franchisor Control

On July 29, 2014, the National Labor Relations Board (NLRB) issued an Advice Memorandum (“memo”) which would greatly expand liability for franchisees across the country. The memo creates an expanded definition of the joint employer standard and directs administrative law judges to hold franchisors and franchisees jointly liable in a greater number of labor-related cases.

The previous standard on determining joint-employer status — which has been in place for 30 years—recognizes separate business entities as joint employers if they “share or codetermine matters governing the essential terms and conditions of employment…[meaning] matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.” The NLRB, however, has imposed a new, broader standard that would result in a joint employer finding whenever “industrial realities” make an entity essential for meaningful bargaining.

The Coalition of Franchisee Associations (CFA) opposes the NLRB’s new joint employer definition. Expanding liability eliminates the ability of franchisees to operate independently and act in the best interests of their employees and customers. With the threat of increased liability, franchisors will exert even greater control over franchisees and reduce the franchisees’ role to that of glorified managers. Further, in order to protect the brand and support franchisees with more staff and resources, franchisors are conducting massive brand consolidation and eliminating the single store operator.

CFA is also concerned about the legal implications of this new standard on franchisee liability. Most, if not all, franchise agreements include an indemnification clause that absolves the franchisor of liability against lawsuits arising out of a franchisees’ business operations. Therefore, regardless of increased franchisor liability arising out of the new joint employer standard, franchisees will still be held solely liable for labor-related claims, which will no doubt increase due to an influx of lawsuits by those seeking compensation from the “deeper pockets” of franchisors. The result is an increase in franchisee liability as well as franchisor control – a lose-lose for franchisees.

The clearly stated purpose of the new joint employer doctrine in the franchise space is to unionize an entire franchise system’s employees of its numerous independent franchise owners. It seeks to accomplish this by forcing a franchisor to negotiate a collective bargaining agreement covering its entire system. CFA vehemently opposes any situation where a franchise owner is obligated under a contract negotiated by another party, particularly in systems where franchises are not operated by the franchisor negotiating the agreement. Such a franchisor will have few, if any, of the burdens of the employer who was frozen out of the negotiation and will have none of the costs. As discussed above, CFA’s franchise owners sign agreements which require them to indemnify any such cost borne by a franchisor in addition to their existing obligations to their employees.

While CFA opposes the new joint employer standard generally, it acknowledges the need to protect franchisees from franchisor control, overreach and the ultimate goal of unionization. In order to promote good faith and fair dealing, CFA supports increased franchisee protections in the areas of disclosure, transfer/renewal/termination rights, pricing, sourcing and encroachment, among others. We urge the franchisor community to support and adopt the principles as set forth in the Uniform Franchisee Bill of Rights as well as in federal, state and local franchisee rights legislation.

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Government Overreach Continues Even After You Die

By Rob Branca

The U.S. Internal Revenue Service has issued long feared proposed regulations (REG163113-02) that intend to take more of the estates of small business owners, preventing family businesses from being passed on to their children. As has been often lamented about children being forced to sell the family farm to a McMansion developer or a large corporate farming interest to pay the punitive “Death Tax,” so too does this fate befall franchise owners.

The IRS seeks to eliminate the common discounts taken for lack of marketability, minority ownership status and lack of control, among others. Family businesses often place these restrictions on shares in the business that they gift to their children. These are not publicly traded shares of Bank of America that can be routinely and easily sold for a publicly known value. There simply are no non-family buyers for a share in a family business, regardless of how successful it is; thus the discount in valuation down from fair market value.

The IRS now wants to value those gifts as if they were indeed arms lengths sales for full fair market value in order to apply the Death Tax to them and confiscate parents’ equity in their businesses. This eliminates room in the exclusion of assets that may be gifted from one’s estate ($5.45 million per grantor) by inflating the value of every gift, leaving anything outside of the exclusion subject to the massive Death Tax.

Franchises are especially vulnerable if these regulations are amended because of factors particular to franchising that naturally depress share price. Most notably, there is an omnipotent third party in franchise transfers that is not present in a non-franchised family business: the franchisor. Franchisors typically posses the power to not only apply not insubstantial fees on transfer, franchisors can also deny them outright. Franchisors also typically possess a right of first refusal to step into the shoes of any transferee.

Transferees often price the uncertainty created by these franchisor rights into the purchase price, knowing that the time and money spent on due diligence, negotiation, attorneys and accountants can be completely lost.

However, perhaps the most discounting factor in valuation of an interest in a franchise is the severely limited pool of buyers. Only an approved franchisee of the system is even eligible to buy at all.

One would ike to believe that the federal government would understand these natural limitations on value. However, the entire joint employer debacle now unfolding on the franchising industry is ample evidence that this is not true. Or, it may simply be that regulators do not care that their actions can wipe out small family businesses in the pursuit of tax revenue and appeasing special interests which are allied against franchising’s often wildly successful business model.

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Rubio, Moran, Flake Introduce Bill to Protect Family Businesses

Washington, D.C. – U.S. Senators Marco Rubio (R-FL), Jerry Moran (R-KS), and Jeff Flake (R-AZ) today announced the introduction of the Protect Family Farms and Businesses Act (S.3436), legislation that would prohibit the Obama Administration from implementing its proposed regulations to unilaterally expand and raise the death tax on family-owned small businesses.

All three senators also joined 38 of their colleagues today in urging U.S. Treasury Secretary Jacob Lew to withdraw the proposed regulations, writing that “they directly contradict long-standing legal precedent, create new uncertainty for taxpayers, and put family-owned businesses at a disadvantage relative to other types of businesses.”

“Small businesses are the backbone of our economy, and for many Americans, the family farm or business represents an opportunity to pursue the American Dream,” said Senator Rubio. “The Obama Administration’s attempt to unilaterally raise taxes on hardworking entrepreneurs is wrongheaded and will kill jobs. As one lumber manufacturer in Florida whose family has built a business over four generations said, ‘this type of rulemaking is devastating to our communities.’ We can’t allow that, any more than we can allow this end run around Congress. My bill will stop this harmful regulation from taking effect and protect workers in Florida from losing their jobs.”

“The Treasury Department should pursue policies that encourage the creation and growth of family-owned farms or businesses – not those that will increase the tax burden on families and make it more difficult to transfer ownership to the next generation,” said Senator Moran. “I have long sought a permanent repeal of the estate tax, and I will continue to work to protect American farmers and small businesses from burdensome tax policies.”

“This proposed regulation will circumvent Congress and make it more difficult for family-owned businesses and farms to survive after the death of a loved one,” said Senator Flake. “These businesses are the primary employers in many of our communities and we should be reducing the unsustainable regulatory burden on them, not adding to it.”

Last week, Rep. Warren Davidson (OH-08) introduced the same bill (H.R. 6100) in the U.S. House of Representatives.

“Many family farms and businesses already operate on a thin margin. It’s unfathomable to think that when tragedy strikes a family that the IRS will hit them with a business-destroying tax,” said Rep. Davidson. “And now the IRS wants to unilaterally hike that tax, giving family businesses a terrible choice: downsize and lay off staff or sell the company. It is immoral that the government cripples businesses and families with this tax, and Congress must act to stop this latest executive power and revenue grab.”

The legislation is supported by the Coalition of Franchisee Associations (CFA), the International Franchise Association (IFA), and the Family Business Coalition, a group of 115 associations jointly representing millions of small businesses from nearly every sector of the economy.

“This bill prevents implementation of the U.S. Department of Treasury’s proposed regulations which greatly restrict estate and gift tax valuation discounts. If implemented in their current form, these regulations will greatly damage the ability of franchisees to pass their businesses down to their children and grandchildren,” said CFA Chairman Keith Miller and Executive Director Misty Chally. “CFA supports the Protect Family Farms and Businesses Act as it recognizes the limitations that are placed upon today’s franchisees and prohibits the U.S. Treasury from restricting the transfer of a franchise to family members.”

“The International Franchise Association applauds the introduction of the Protect Family Farms and Businesses Act, S.3436, by Senators Rubio, Moran, and Flake, which would prevent the Treasury Department from unilaterally increasing estate taxes on family-owned businesses and making it harder for families to pass their franchise small businesses down to their children,” said IFA Vice President of Federal Government Relations and General Counsel Elizabeth Taylor. “Franchise small businesses are a crucial component of the nation’s economy with over 733,000 franchise establishments nationwide and over 47,000 units in Florida alone.  If these regulations are enacted, it will hamper franchisees’ ability to continue to grow their businesses and create jobs in the future.”

“The Family Business Coalition strongly supports Senator Rubio’s legislation preventing the Treasury Department from hiking the death tax without the consent of Congress,” said Chairman Palmer Schoening. “The death tax hurts family business owners and farmers seeking to pass to the next generation. Changing tax laws should be left to the appropriate committees in Congress, not ceded to outside agencies.”

U.S. Federal Trade Commission building.  October 16, 2012.  Photo by Diego M. Radzinschi/THE NATIONAL LAW JOURNAL.

Franchisees Want Private Right of Action to Pursue Franchisor Lies in Disclosure Document

WASHINGTON, D.C.— The Franchise Rule is the guideline that franchisors follow in disclosing the risks and benefits of a franchise investment. It is a rule that the Federal Trade Commission says it strives to update every ten years.

The last time it was amended was 2007. At the time, Susan Kezios, chairperson of the American Franchisee Association, told Blue MauMau just how little change there was for franchisees. “The Federal Trade Commission labored a dozen years to revise its Franchise Rule — only to give birth to a mouse,” declared Kezios.

To be fair, there were changes. For example:

  • Instead of 14 days ahead of the franchise purchase, the disclosure document could be delivered to the buyer in 10 days
  • Franchise brokers no longer needed to be disclosed
  • Reporting of related franchise litigation of the parent company became a requirement

What Kezios was alluding to was that these were superficial changes around what was needed most to give the rule teeth – a franchisee’s private right of action to go after a wayward franchisor in order to help the Federal Trade Commission enforce its rules. There was nothing then, and nothing now in 2016 about the big gorilla in the room – the FTC sharing its power to go after wayward franchisors by giving franchisees a private right of action to enforce its rules through lawsuit.

Kezios back then explained why a private right of action is necessary to give teeth to the Franchise Rule. “Because the FTC has a consistent record of rarely (if ever) enforcing its own Rule, a private right of action would allow franchisees their only remedy for franchisor fraud and material omissions in the 38 states without state franchise registration/disclosure laws. A private right of action would also level the playing field by taking away the unfair advantage of regional franchisors who offer franchises for sale only in non-registration states. Without it, there is no level playing field for franchisees, no checks and balances for franchisors, and no opportunity for the mouse that is the FTC’s revised Franchise Rule to roar.”

Keith Miller, the current chairman of the Coalition of Franchisee Associations, agrees with those statements from eight years ago. He stresses that without the private right of action, there is no remedy via the FTC or state regulators for the franchisee, even if the Franchise Rule is violated and an enforcement agency takes action against a bad franchisor because the franchisee is not able to take the franchisor to court for damages. In addition, the private right of action would allow the franchisee, in a sense, to create enforcement of the Franchise Rule when the FTC or state agency is unable to investigate or take action on alleged violations, often due to limited staffing.

Miller stresses that there are other updates that still need to happen to the Franchise Disclosure Document. “We believe that EBITDA needs to be disclosed,” he told Blue MauMau. However, he thinks that more than anything else, franchisees need a private right of action if the franchisor inserts bogus information to trick franchise investors to buy. “Changes for better disclosure in the Franchise Disclosure Document does not carry much meaning to franchisees unless there is some teeth, a private right of action,” says Miller. “Otherwise, states, or even the federal government, can penalize franchisors for misleading disclosure of EBITDA, but the individual franchisee will be hard pressed to recover from the harm to him or her. Requiring a franchisor to disclose earnings won’t put money in the franchisee’s pocket if a franchisor lies to him,” says the chairman of the franchisee association.

Read the original article from Blue Maumau here.

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Two Words that Changed the Face of Franchising

For four years – between 2011 and 2015 – a group of business owners representing the biggest names in franchising joined with a team of lawyers and consultants to amend the California franchise law and level the playing field in a sector of the U.S. economy responsible for nearly $500 billion in gross domestic product.

It wasn’t easy. There were many losses and too few victories in the early stages, but the group never lost hope. Last fall, their countless hours of unpaid work paid off. For the first time in a decade, a state law was changed to offer new protections to franchise owners.

DDIFO played a significant role in the effort. As a charter member of the Coalition of Franchisee Associations (CFA), DDIFO was one of the entities providing capital and resources for the group, which secured a bi-partisan bill that was signed into law by a governor who had earlier vetoed a similar measure.

This bill’s back story is filled with dates and details; meetings and memos; negotiators and naysayers. But, what it ultimately came down to was the perseverance of the group and the idea that two words could change everything.

Monetized Equity

Keith Miller is a long-time Subway franchisee and chairman of the CFA. He boils the battle down to these words: Monetized Equity. Miller has said them so many times, but when he repeats them it’s with a trace of epiphany, as if he had just thought of it that very moment.

“The term came directly from the IFA’s [International Franchise Association] statement of guiding principles. We took the paragraph from there and inserted it into our bill. It said, basically, ‘If you terminate someone they have the right to monetize the equity they have invested in their franchise,’” he says.

The language fit perfectly. It didn’t hurt that the words came directly from the CFA’s chief opponent. For years, IFA had vigorously opposed any attempts to change franchise laws, anywhere. Now, Miller and the group thought they might have the leverage necessary to get the IFA to the bargaining table and identify some common ground where they could work together to change the law.

CFA Vice-Chairman Rob Branca, a trained attorney, who also operates a network of Dunkin’ Donuts locations and serves on the Brand Advisory Council (BAC), thought the IFA language dovetailed beautifully with the Universal Franchisee Bill of Rights, a 2011 fairness doctrine adopted by the CFA, which states, “Termination shall not occur without good cause, and termination shall not compel payments of liquidated damages or early termination fees.”

Branca saw the opportunity to engage directly with the IFA and build a consensus for a bill that would satisfy IFA’s interests while also providing stronger protections of franchisee equity during transfers or terminations. Branca had good relationships with IFA leaders and believed that there were several core principles on which both groups commonly agreed, and could be the foundation for negotiation.

“For us, the bill had to have language that allowed for franchisees to monetize their equity,” says Branca. “We also strongly believe that franchisors need the power to protect the integrity of the trademark as well as the business equity built by its franchisees. We all should be on the same page about that—and we were. They’re protecting our business equity as much as their own intellectual property.”

“It’s a property rights issue,” says Miller. “Why does a franchisee’s possessions become the franchisor’s possessions if he gets legally terminated? Aren’t property rights a basic tenant of the free market system?” Miller questions rhetorically.

That question stuck with John Gordon, principal of Pacific Management Consulting Group and DDIFO’s restaurant analyst. Gordon, who lives and works in California, was one of the key members of the team that included Miller, Jas Dhillon, the chair of the political action committee created by 7-Eleven franchisees and Branca.

“We saw this as a non-partisan issue because Democrats and Republicans agree on the importance small businesses play in California’s economy and society,” Gordon says. “But, a potential franchisee may say, ‘How can I invest in this business and then have it taken away from me?’”

Indeed, as Branca points out, franchising has changed—and now attracts more very large multi-unit owners and institutional investors, financed with capital from private equity funds. Many of those people were in attendance at the 2012 Multi-Unit Franchising Conference when, as Branca recounts the story, Bill Hall, a Dairy Queen franchise owner and former IFA board member, publicly criticized franchise agreements as unfair, at one point asking a panel of franchisors, “Would you ever sign your own franchise agreement?”

“This was the first time that the previously unspoken controversy was voiced in such a prominent forum populated by both franchisors and franchisees. Pointedly, this conference was held as Miller was shuttling back and forth from the conference to Sacramento to testify in committee hearings on the bill, resulting in an early defeat to CFA’s efforts,” Branca says.

Talks with the IFA

Branca recalls a warm, September day in 2015, when he visited the K Street offices of the IFA to meet with its then-President and CEO Stephen Caldeira, who Branca knew well from his days as head of global communications at Dunkin’ Brands. Also at the meeting was Robert Cresanti, who had recently joined IFA to run government relations and would eventually replace Caldeira. Branca says it was a “breakthrough meeting,” and credits his colleague Aziz Hashim for getting everyone to the table. At the time, Hashim was vice chair of the IFA.

“We agreed on several core principles. We saw eye to eye on a number of topics and knew we had to continue conversations,” Branca says.

Over the years, Branca was one of several franchise owners who had an ongoing constructive dialogue and shared lobbying efforts with IFA over issues like minimum wage and sick leave pay.

“The collective work we did on these issues built a foundation of trust. So you knew the people you were dealing with were reasonable human beings,” he recalls. “We knew one another’s positions and could discuss them amicably even where we were not aligned.”

That explains, at least in part, how the monetized equity language found its way from the IFA’s core principles into a bill that group had been fighting for three years. In 2014 – despite fierce opposition from IFA – a Fair Franchising bill passed both the California legislative houses, only to get vetoed by Governor Jerry Brown.

Refining the Language

Keith Miller has spent his entire life in California. His career as a franchise owner began after Brown’s first term as the Golden State Governor (1975-1983); but he found himself in Brown’s crosshairs when, on September 29, 2014, the governor vetoed Senate Bill 610. Miller says certain language in that bill didn’t sit well with Gov. Brown, in part because it was not represented in any other franchising laws in any other states.

“We understood from the Governor and Assembly members that any language in the bill had to appear in laws in other states. They didn’t want to break new ground,” Miller says.

Branca, Gordon, Miller and the others saw a silver lining in that dark cloud. They felt if they could refine the language to address Brown’s concerns, they could refile the bill in 2015. They found a new champion for the effort, a former Subway franchisee who was now the California Assembly Floor Leader. Chris Holden, a Democrat from Pasadena, had agreed to be the primary author of the new bill (AB 525). Another Democrat, Bill Dodd of Napa signed on to be a joint author; then Speaker of the Assembly, Toni Atkins, signed on as a joint author. Gordon called that “a big time development.”

“Governor Brown gave us good guidance. One of his concerns was that both sides (IFA and CFA) were not aligned. He also wanted them to tone down the rhetoric. That provided a good starting point that none of the previous bills had,” according to Holden.

Inside the state capitol there had been a sense that a new franchising law was too contentious. IFA poured enormous lobbying resources into defeating the bill.

“We had to overcome that, and everyone worked hard to show that we had given up many of our requests. We had taken many amendments through the Assembly committees, yet it didn’t seem to slow the opposition.” And Miller says Holden himself had been targeted by the IFA because of his support.

The irony, Miller says, is that Holden, who is known around Sacramento as a lawmaker who will compromise – and, in the case of AB 525, actually accepted over 30 compromises – was being painted as someone who would not compromise and would rather rush votes through. The strategy backfired. “After that, it became difficult for the opposition to maintain credibility on franchise issues inside the General Assembly.”

Throughout the process the volunteers, known loosely as the California franchisee legislative reform team, had been holding weekly conference calls to keep their campaign on track. Once Holden and his legislative team came onboard, Gordon says, those calls took on an even more urgent tone. While his team was focused on making sure all i’s were dotted and all t’s were crossed, Holden was busy securing support from Democrats and Republicans. In a key move, Holden stepped across the aisle to ask Assemblyman Scott Wilk, a Republican from Simi Valley, to be a joint author of the bill. Wilk agreed.

“In Sacramento the legislative agenda is big labor, big business and bigger government.  The little guy gets crushed.  Having owned three businesses in my lifetime, I am very pro-small business.  I thought my party should be leading the charge on this issue,” Wilk says.

The issue was also a bit personal. Wilk recalls an incident that happened to one of his close friends who owned a number of franchised restaurants and then branched out to open a wine bar. As Wilk tells the story, his friend was pressured by his franchisor to sell the wine bar, even though it didn’t directly compete with his franchises.

“He was informed to sell the wine bar or risk losing his five stores.  When you are a franchisee you should be a partner with the franchisor, not an indentured servant,” Wilk says.

Cautious Optimism

With Holden, Atkins and Wilk all signed on as co-authors, Miller and his team were cautiously optimistic. As the 2015 legislative session unfolded, AB 525, was introduced, complete with language reflecting other state laws. Leaders in both houses sent the bill to committee for discussion. The Assembly Judiciary Committee was first to approve the bill; then the conservative-leaning Assembly Business & Professions Committee passed it along. All of a sudden, the team was taking notice that they were no longer the underdog in this fight. Gordon remembers the realization that there was now a very good chance this bill could get all the way through and become a law.

That realization was crystallized on May 14, 2015—the day the bill first came to the Assembly for a floor vote. It was the second of two key moments Miller says changed the course of the battle. Heading into the vote, Wilk was certain he could deliver five Republican votes. With his vote added on, he told Miller they could count on six GOP votes. Miller remembers thinking the bill could squeak by. He was understandably excited when the final votes were tallied and it passed 56-12.

“That was the day the tide turned, and the opposition knew they were in trouble,” he says.

After that vote, the IFA stepped up negotiations with the CFA group. Later, the oil companies, who are franchisors to local gas stations but do not hold franchise agreements for the convenience stores that are paired with various gas brands, agreed to support the bill.

As the bill moved through the Senate side of the building, optimism grew. Soon, the bill passed through two Senate committees on its way to a successful floor vote. Additional amendments were added, setting the stage for a final Assembly vote.

On the day the bill would either live or die, Branca says he and the others were confident they had enough support to get a majority YEA vote. Still they were a bit surprised when AB 525 passed the Assembly 79-0, with one abstention.

“It was extremely sweet to have it passed unanimously and with support from both parties in both houses,” Gordon says.

“We never thought we would be unanimous. To pass what a year ago was probably the most contentious bill in the state capitol, where opposition paid millions to fight it, was so unexpected,” says Miller.

A Pendulum Swing

On October 11, 2015, California Jerry Brown signed Assembly Bill 525, which amended key provisions of the California Franchise Relations Act.

Branca calls the bill “a reasonable compromise,” and credits the collaborative efforts of the CFA and IFA to securing its passage.

“We mutually have a duty to protect the franchising business model; it’s incumbent on both sides. We all deeply believed that and that helped us find common ground for those issues about which we disagreed,” he says. “We frequently talked about this as we were crafting the language amending the bill. If not us, who? There were several other players that did not have any stakes in franchising’s success and we knew that we had to be the ones driving the bus, not them.”

Franchise industry watchers say this bill, at its core, tightens the rules which allow a franchisor to terminate an owner’s franchise agreement. And, in a nod to Miller’s theory on property rights, the law requires a franchisor to repurchase the franchisees’ assets upon termination.

Even though the IFA spent years fighting changes to the California law, it now accepts the new regulations.

“The legislature cannot be in a position to change the rules for franchise businesses every year and we hope that the signing of this bill into law marks a long-term resolution and that we won’t see similar bills for many years,” Dean Heyl, IFA’s vice president of government relations, said in a statement.

Miller has a slightly different view of the fight that took four long years.

“It’s not going to solve all problems in the world, but the pendulum was stopped and even swung back a little.”

Read the original article from DDIFO.org here.