Franchise Legislation

Peter Lagarias has repeatedly testified on behalf of legislation for franchisees for decades. Here are some comments on the need for legislation from Peter Lagarias.

Peter Lagarias Comments on the Need for Further Franchise Legislation

Franchising today is dominated by one-sided adhesion contracts written by and for franchisors. Typical provisions negate territory protections, rights of renewal, protections from bad faith and opportunistic behavior, termination, and other basic business rights.

There is a tremendous need for new legislation to level the playing field for franchisees. A high percentage of franchisees enter into their franchises with no experience in their franchise business and some have no business experience at all. They are reliant on the franchisor to guide them in their new business but are also simultaneously bound by the terms of the all too often one-sided franchise agreement. Franchisees often find that franchisors fall short when it comes to training, support, advertising and competitive pricing for franchisees. Franchisees are often promised training relevant to their new business but find that once they purchase their franchise, the training is sub-par or non-existent. This may be a set up for failure. Without proper training and no experience in the business, how can one possibly succeed? Most franchisees are “all in” with their franchise investments. Typically, they invest their life savings to purchase and build out their franchises, sometimes taking out loans secured by their homes. Many franchisees also enter into long term commercial leases, some of which they are held liable for even if the franchisor terminates the franchise. In this instance, the franchisee would be left holding the ball for a lease they no longer need or want. Franchisees usually count on their franchises for their livelihoods and have no other source of income. In most cases, franchisees are completely reliant on their franchises to support themselves and face disaster if their franchise business is not profitable.

In sum, one-sided adhesion contracts predominate in franchising and necessitate legislation to level the playing field. Incompetent and unfair franchisors also present a need for connective legislation.