Maine Small Business Investment Protection Act advances to the House of Representatives.

I noted in 2013 that one franchisor association executive characterized the pending Maine legislation as “the worst legislation we have seen in years.”  The Maine Act requires that franchisors must “deal fairly” and “in good faith” with franchisees.  While these concepts appear to advance a common sense approach, in reality, the broadly defined terms will create litigation in the court houses of Maine for years to come.  In my opinion, inserting ambiguity into a contract between two parties creates nothing but headaches in the form of litigation.  In addition, the Act would require franchisors to: provide franchisees additional time to cure defaults; renew franchise agreements without increasing royalty rates or imposing new fees; and compensate damaged franchisees for placing outlets within their territories. The Act would also limit the ability of a franchisor to enforce post-term covenants against competition and imposes a fiduciary duty upon franchisors when performing certain services for the franchisee, including the administration of the franchisor’s advertising fund.  While lobbyists for franchisor and franchisee trade associations stake out their respective positions, the real winners in the event this bill is passed will be plaintiff lawyers who will create causes of action that fall far outside the four corners of the franchise agreement.  It is anticipated that the House will vote on the legislation before April.  I’ll update this blog with any developments as the vote nears.

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Filed under Franchise Basics, Franchise Insight, Franchise Law, In The News, Restaurant & Hospitality Law, The Franchise Legislation Monitor

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