For thousands of Oregonians, living the American dream is through small business franchise ownership and operation. Known as big brand stores, franchises are neighborhood fitness centers, restaurants, auto-repair shops, and more. Franchisees employ hundreds and contribute to the prosperity of the state. Unfortunately, the dream often becomes a nightmare when unfair business practices by national franchise companies exist through an array of internal policies designed to enrich the corporation at the expense of the franchisee. As a former franchisee, I urge lawmakers to support proposed legislation that would provide a more transparent and mutually beneficial business relationship.
House Bill 2946, introduced by Representative Janelle Bynum, who is a franchisee herself, would protect franchisees from wrongful termination by requiring a due process, allow franchisees to set their own prices and not be required to sell goods or services at a loss by limiting markups, rebates and kickbacks, define the renewal and transfer rights of the franchisee, and define the damages a franchisee may seek if the franchisor violates basic business practices.
I owned and operated numerous businesses in Oregon for 26 years including my first Subway in 1995. Over the next few years, I opened an additional six Subways. I loved my businesses and the communities I served. I enjoyed the benefits of small business ownership including the flexibility. While owning a small business is not for the faint of heart, it was the right fit for me. As all businesses have, I also experienced bumps in the road but more so while being a franchisee.
Many franchises follow scrupulous business practices that unequally benefit the franchise through contract agreements. Some franchises use renewal contracts to gouge store operators and eliminate a fair and cost-balanced equity in profits. Other times, food supplier contracts incentivize the franchisor. Incidents of food suppliers not delivering merchandise to stores due to conflicts between franchisor and franchisee can occur. And, in many instances, disputes must be settled by binding arbitration that takes place in outside jurisdictions – not within the confines of the state of the dispute.
There are more than 9,000 franchises in Oregon. Franchisees employee more than 82,000 and contribute approximately 2.9 billion in state taxes. Nationally, nearly 30 percent of franchises are minority-owned.
In 2017, I was forced to close my stores and lost hundreds and thousands in income and equity. My employees were left without work and I became another victim to the abuses from unconscionable contract agreements. It was a price I was forced to pay for being vocal and standing up for my rights as an independent business owner.
Franchisees are hard-working small business owners, many of whom became part of the system to provide for their families. Building on an existing prosperous state economy is dependent on lawmakers to support policies that empower franchisees and franchisors. HB 2946 is a step in the right direction to protect franchisees and create a more transparent process of business.
Keith Lawhorn is a former franchisee and lives in Rockaway Beach, Ore.