Franchise Owners Push Bill

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Atlanta-Legislation to give some legal protections to the owners of franchise restaurants has the restaurant industry worried about its ability to do business in Georgia.

The Georgia Restaurant Franchise Relations Act passed the Georgia House 95-59 recently and was positioned to reach the full Senate for a vote before the end of the current General Assembly session last week.

The legislation, if approved, would require a franchisor to give a franchisee 90 days to fix a problem before a contract is terminated and would establish an arbitration process for disputes. It would also prohibit a franchisor from denying heirs of a deceased franchisee or the majority the chance to continue a contract.

"I think this will have a severe impact on the franchising industry in the state of Georgia," said Allen Tanenbaum, senior vice president and general counsel of AFC Enterprises. "It will severely restrict a franchise system's ability to enforce system standards that are vital to protect all franchise operations."

The Georgia Restaurant Association and individual chains have lobbied legislators to defeat the legislation.

Don Perry, a spokesman for Chick-fil-A, which has 145 franchised restaurants in Georgia, complained that the legislation is too vague as it relates to the termination of a contract. "If it's food safety or a quality issue, then you have to have an immediate reaction," he said. "Ninety days would leave too much margin in there."

But the legislation drew praise from small-business groups.

"If this passes, it will be a boon for franchisees," said Carlotta Roberts, director of the Small Business Development Center at Kennesaw State University. "Georgia has been a 'business opportunity' state, and there hasn't been much in state law that will protect a franchisee. Maybe franchisors will sit up and take notice."

According to the International Franchise Association, since 1992 more than 30 states have considered and rejected similar legislation. One state that did pass such legislation was Iowa. The 1992 law has since been amended, but in a 1996 report, the Iowa Coalition for Responsible Franchising claims the state lost more than $226 million in revenue after companies bypassed the state for new franchisees.

Opponents of the bill warn the same could happen in Georgia.

But Rep. Larry Walker (D-Perry), one of the bill's co-sponsors, dismisses such talk.

"Rest assured, McDonald's and Hardee's and all those people will keep putting restaurants in Georgia," he said. "They want to make money." -The Atlanta Journal-Constitution