No kidding. The debate over these and other issues has been raging for years. A long series of legislative solutions has been proposed and struck down. Rep. John LaFalce (D-NY), for example, has been introducing franchisee-oriented bills since 1990, when he served as chairman of the House Committee on Small Business. None have made it very far.
Last year, Coble and Rep. John Conyers (D-MI) introduced the Small Business Franchise Act of 1998. The bipartisan action didn't make much headway because it was introduced at the end of the 105th Congress. It seems that Coble and Conyers plan to use it as the launching pad for new legislation set for introduction before Congress convenes for recess the first week of August.
"Rep. Coble is still trying to determine what scope he wants to take on this," says Ed McDonald, a spokesman for Coble. "He introduced the last issue just as a signal that we would be involved in this issue in the 106th Congress."
In Coble's testimony before the House Judiciary Subcommittee on Commercial and Adminstrative Law, he painted a less-than-flattering picture of franchising.
Total investment on a typical franchise can reach several million dollars. Start with a licensing fee of $3,000 to $100,000. Add another $100,000 to several million dollars in equipment, signs and supplies. Then tack on $12,000 to $30,000 for starting inventory and $50,000 in miscellaneous opening expenses. And don't forget payroll expenses for all those employees who help you launch your franchise.
That price tag just gets you started. Now you have to worry about the franchise fee, typically 5 to 12 percent of gross revenues, and an advertising fee of about 3 percent. Not an appealing prospect. And yet franchising has become a huge part of the U.S. economy. According to the American Franchisee Association, small business franchisees employ over 8,000,000 workers in more than 60 different industries.
Coble acknowledged that the benefits of franchising are undeniable: a recognized brand name, advertising and marketing knowledge, support and training. What he'd like to add to that is a level playing field. He noted that there has been an increase in franchising-related litigation and complaints to the Federal Trade Commission. Not a good sign.
