The Future Of Franchise Laws

What State Laws Have To Teach Us

FZ: What can you learn from Iowa's franchise relationship laws?

Kezios: David Kaufmann's friends have bitterly fought the Iowa franchise act. Despite that fact, franchising is flourishing in Iowa. If you look at any state that has some state relationship legislation, and, if it's adjacent to a state without any, there's not a mass exodus of franchisors from the state with the legislation into a state without. David Kaufmann and the lobbyists that work for the franchisor side of the fence have no evidence that legislation harms franchising.

Kaufmann: I disagree entirely. First of all, there is hard evidence that franchise activity in Iowa subsided significantly as a result of Iowa's enactment of its franchise-relationship law. Secondly, with due respect to the citizens of Iowa, Iowa is hardly representative of some of the more populated and economically active states where such legislation would be absolutely ruinous. Thirdly, if franchisee advocates would stop advancing shrill and wholly unsupported sob stories and instead avail themselves of the sophisticated studies and other data that exist regarding market penetration, market saturation, advertising curves and similar econometric information as to what makes successful chains successful, they would swiftly withdraw their oft-repeated suggestions that franchise relationship laws are not extraordinarily harmful.

FZ: Will having George W. Bush as president affect the outcome of this bill in the new Congress?

Kaufmann: I'll be as blunt as I can on this one. I don't think this bill is going anywhere. I don't think this bill has any chance of success whether the Congress or the president is Republican, Democratic or wholly independent. The simple fact of life is that [franchisees] are making a lot of money, have made a lot of money and will make a lot of money, and [that success] can only be jeopardized by heavy-handed government legislation that can turn franchising into an operation as efficient as the U.S. Postal Service.

Kezios: I think that might be wishful thinking on Mr. Kaufmann's part. Right now, the fact that the Senate is so evenly divided-50-50-means this could be the best chance ever for franchisees to move a piece of bipartisan legislation through the Senate.

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