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June 1999 Blast Fax
Congressional Hearing June 24 Focuses on Franchising The place to be on Thursday, June 24th at 10:00 am is Washington, DC when the House Judiciary Committee’s Subcommittee on Commercial and Administrative Law holds a hearing on issues of importance to franchisees. This hearing was scheduled due to the American Franchisee Association’s (AFA) success in having bi-partisan legislation introduced last Congress (HR 4841), by Congressmen Howard Coble (R-NC) and John Conyers (D-MI). A steady stream of letters to Congresspeople from franchise owners like YOU is another reason for Congress’ interest in franchising issues. The structure of the hearing is still being decided as we go to print. It is envisioned that the discussion with Subcommittee Members will be wide ranging and not limited exclusively to the specific’s of last year’s HR 4841. We expect the AFA and several of its members will be asked to testify. It is expected that the franchisor trade association and their supporters will oppose the fundamental fairness questions raised by Coble/Conyers and supported by the AFA. Come to the Hearing and Bring Your Friends Franchisees from across the country are expected to attend the hearing as a show of force and unity across brand lines. Two franchisee associations are sending car pools (a bus in one case!) of their members to the hearing. Small business owners from states reasonably near our nation’s capital (Pennsylvania, Delaware, Virginia, Maryland, North Carolina, New Jersey, etc.) should make an extra special effort to be in the hearing room. AFA’s Government Relations lobbying firm in DC will schedule meetings for franchisees with their Congressional offices prior to and immediately after the hearing. Our Washington office will also be setting up appointments with franchisees and journalists. If you can arrange your schedule to join us, please do so. And please wear a shirt, jacket, uniform or other insignia identifying which franchise you own. Contact Samuel Crawford at the AFA (312-431-0545) to confirm arrangements, i.e., where and what time to meet up with fellow AFA members. Write the Subcommittee Today Please write each member of the Subcommittee today. Below we have included the list of Subcommittee members, their addresses and phone and fax numbers. (You could also go to the AFA’s web site ( www.franchisee.org), click on the Legislative Action Center and e-mail your letter to members of the Subcommittee.)We have included a sample letter (below) you can use to write each member of the Subcommittee. Write them today—the day you get this Blast Fax. Put it in the mail and also FAX it to them (and to the AFA 312-431-1469). Use the same letter for each member on the Subcommittee. It doesn’t matter right now if you are from the Subcommittee member’s legislative district. The U.S. Congress is holding a hearing to learn about issues that affect you as a small business owner. As a citizen of the United States of America you have the right to express your opinion through the legislative process…and that means you can let each subcommittee member know your viewpoints about franchising in a letter NOW. U.S. House of RepresentativesJudiciary Committee Subcommittee on Commercial and Administrative Law Chairman George W. Gekas (R-PA) 2410 Rayburn House Office Building Washington, DC 20515-3817 TEL: 202-225-4315 FAX: 202-225-8440 Spencer Bachus (R-AL) Mary Bono (R-CA) Ed Bryant (R-TN) Steve Chabot (R-OH) Lindsey Graham (R-SC) Joe Scarborough (R-FL) Ranking Minority Member Tammy Baldwin (D-WI) William D. Delahunt (D-MA) Melvin Watt (D-NC) Anthony Weiner (D-NY) Sample Letter: DATE The Honorable (Name of Representative) Dear Congressman/woman (Last Name): I am writing to draw your attention to an issue that is very important to me as a small business owner and job creator. I own a (number) (name of franchise) in (town). Our margins are tight but annual revenues are ($$$) and I employ (XXX) full-time and part-time employees. I first invested in my franchise in 19__. On Thursday, June 24, at 10:00 am, the House Judiciary Committee Subcommittee on Commercial and Administrative Law , chaired by Mr. Gekas from Pennsylvania, will hold a hearing regarding issues and concerns in the business of franchising. I urge you to attend this hearing and give these issues your full attention. Little recourse has been available to small business franchisees such as myself from either the Federal Trade Commission or the states. As a result, successful franchisees often find themselves in courtrooms litigating with bad actor franchise corporations that have not acted in good faith with their franchisee partners. In my situation (describe in one paragraph one issue that you have, if any). I look forward to discussing these and other issues with you after you have heard the testimony at the June 24th hearing. My vested interests and those of my small business, could be postively impacted by Congressional action in this session of Congress. Thank you. Sincerely, Your Name August 20-21, 1999 May 3-5, 2000 Comprehensive Study of Pizza Franchise Agreements Released The American Franchisee Association (AFA) released a first-of-its-kind comparison study of the franchise agreements and franchise offering circulars of the top eight pizza chains in the United States at the organization’s Franchisee Legal Symposium held last month in Hilton Head, SC. Entitled, Holding a Gun to Your Head: Marketplace Monopoly—How Pizza Franchisors Play the Game, the study was sponsored by the AFA and coordinated by Eric H. Karp, partner in the Boston law firm of Witmer, Karp, Warner & Thuotte, L.L.P. Dr. Frank Wadsworth, Assistant Professor of Marketing at Indiana University Southeast and Laura Gal, an associate with Witmer, Karp, Warner & Thuotte co-authored the study with Mr. Karp. According to the study, the top eight pizza franchisors’ sales exceed $10.7 billion per year and control over one third of the entire ready-to-eat pizza market. Approximately 65% of their locations are franchised. Collectively they account for 85% of the sales of the top 27 franchised pizza chains. "This means that the top eight wield enormous market power, functioning as a de facto monopoly in the presentation of franchise contract terms," stated Eric Karp. The study found that the franchise agreements offered by the top eight pizza franchisors are remarkably and disturbingly similar in content. Three themes permeate the agreements studied: 1) unbridled discretion in the hands of the franchisor, 2) unlimited calls on the franchisee’s capital and 3) asymmetry of the rights and obligations of the two parties. Mike Chiodo, Executive Director of the Domino’s Franchisee Association (DFA) stated, "I believe franchisors feel that nobody holds a gun to the franchisee’s head when an agreement is signed. While literally this is true, the study shows that contractual similarities between the competing chains is astounding and few alternatives really exist." Copies of the study can be obtained by calling Peggy Ryan at the American Franchisee Association (312-431-0545). The cost for AFA members is $50, for non-members $100. Howard E. Bundy Howard has represented franchisees from over 100 different franchise systems. He was an AFA-elected delegate to the 1995 White House Conference on Small Business (WHCSB). He is currently a member of the American Bar Association’s (ABA) Forum on Franchising and serves on the Franchise and Business Opportunity Advisory Project Group to the North American Securities Administrators Association (NASAA). In appropriate cases on behalf of franchisees, Howard’s firm will work on a contingency or other creative fee arrangement basis. Contact Howard at 206-367-4640. The Iowa Franchise Act still stands. For those following the details, the Metcalf Amendment was defeated in the Iowa House by a resounding vote of 61-36. Therefore, the original Iowa Franchise Act (as amended in 1995) still stands. The franchisor trade association and their supporters at times had eight different lobbyists working against the Iowa Franchisee Association and the AFA. Jerry Fitzgerald and his partner Mark Joyce have done an outstanding job for franchisees in Iowa—yet again. Jerry Fitzgerald is truly a master of his trade. After the Amendment was defeated, Metcalf asked for it to be deferred. This means they could bring it back again next year. And knowing the opposition the way we do, they probably will attempt to bring it back again next year. Congratulations to Bob and Kevin Schlutz, Bill Allen, AFA Affiliate Member Brent Appel and everyone associated with the Iowa Franchisee Association for a job well done. The Iowa Franchise Act is still the law of the land. August Multi-Unit Operators Retreat (MORE) The AFA is looking forward to its second Multi-Unit Operators Retreat (MORE). This time the event will be held at The St. Regis Aspen in Aspen, Colorado on August 20-21, 1999. The MORE is designed for owners of multiple franchise units to exchange information and insights regarding the similarity in issues and contract trends. At the request of previous MORE attendees, legislative issues will be a bigger priority at the August event—especially after the June 24th hearing in Washington, DC. You can plan a family summer get-away around your participation at the MORE. There are many activities for spouses and children alike in Aspen during the summer months. These include hot air ballooning, paragliding, fly fishing, hiking, rock climbing, horseback riding, golf, tennis and whitewater rafting. Previous attendees appreciated the inclusion of families. Paul Houston, CEO of Scott’s Restaurants said, "The MORE Retreat provided me with a relaxing environment to network with other large franchisees, particularly from other businesses, and gain new perspectives." Any franchise operator owning multiple units in one or more chains is invited to attend. Seating is limited, advance registration is necessary. Call Peggy Ryan at the AFA (312-431-0545) to receive a MORE invitation. TOPRequest for Legal Symposium Topics Deadline September 3, 1999 The AFA Legal Symposium Steering Committee is accepting ideas for topics for the Year 2000 Legal Symposium. The deadline for submission of topics is Friday, September 3, 1999. If you would like to present a topic, please title the workshop session, include a paragraph or two describing your idea and indicate if you think your topic warrants a general session or if it should be considered a concurrent break-out session. Please provide us with all of your contact information including FAX and e-mail numbers. (If you are recommending someone else as a speaker, please provide us with his/her name, address, telephone, FAX and e-mail numbers.) The AFA Legal Symposium Steering Committee will review all suggestions and make all final decisions regarding both the choice of speakers and topics. Please submit all suggestions to the AFA via facsimile at 312-431-1469 or e-mail at SKeziosAFA@aol. AFA PAC
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