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Owners of franchises may get more control

A Subway restaurant sits across the street from a McDonald's restaurant.

Franchises, from fast-food restaurants to plumbing chains, are getting a lot of attention from lawmakers in California right now. A bill that would make it harder for parent companies to sever agreements with their franchisees passed in the state Assembly last week. It is headed to the state Senate next, where it is also expected to pass.

Keith Miller, who owns three Subway sandwich shops in northern California, supports the bill. He bristles at the power his parent company has over his business under current California law, which allows a franchisor to terminate a contract if franchisees stray from even the tiniest details.

“Fingerprints on the window — that’s in the operations manual that you must have windows and a front door that are clean and fingerprint free,” Miller says.

The bill moving through the California legislature right now, SB 610, would allow contracts to be severed only for “substantial and material breaches."

Miller, who is chairman of the Coalition of Franchisee Associations, says he hopes the bill will give franchisees like him a little more power in the franchisee-franchisor relationship.

That hope is shared by one of the nation's big labor unions, the Service Employees International Union, which has been paying for radio ads and digital media campaigns supporting the bill. As Christopher Calhoun, spokesman for SEIU California, told the Huffington Post: "Increasingly we are seeing franchisees and workers facing a similar challenge. Fundamental power imbalance enables multinational corporations to haul down billions at the expense of both workers and franchise owners."

But the bill could do damage to corporate brands and the franchisees who profit from those brands, argues Matt Haller with the International Franchise Association, an industry group that represents both corporate franchisors and franchisees.

“If franchisors can't maintain that brand integrity across their system,” Haller says, “then that's really going to be detrimental to the overall growth of franchising.”

About the author

Krissy Clark is the senior reporter for Marketplace’s Wealth & Poverty Desk.

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