[Congressional Record (Bound Edition), Volume 145 (1999), Part 21]
[Extensions of Remarks]
[Pages 31246-31247]
[From the U.S. Government Publishing Office, www.gpo.gov]



                    THE SMALL BUSINESS FRANCHISE ACT

                                 ______
                                 

                     HON. HOWARD P. ``BUCK'' McKEON

                             of california

                    in the house of representatives

                      Thursday, November 18, 1999

  Mr. McKEON. Mr. Speaker, I am a recent cosponsor of H.R. 3308, the 
Small Business Franchise Act introduced by Representative Howard Coble. 
Today, I include for the Record testimony from a recent Judiciary 
Commercial and Administrative Law Subcommittee hearing on this 
legislation. During this hearing a constituent of mine, Patrick Leddy, 
testified about his dealings as a franchise owner. Because of his very 
moving testimony, I became a cosponsor of this legislation. I wish to 
thank him for his words and include them in the Record today.

                 Statement of Patrick James Leddy, Jr.

       My name is Patrick James Leddy Jr. I have owned and 
     operated a Baskin-Robbins 31 Flavors franchise in Newhall, 
     California since August 1, 1986, a total of 13 years. I am 
     also a 26 year veteran firefighter with the Los Angeles City 
     Fire Department. I purchased my franchised business to 
     supplement my income, and to prepare my wife and I for our 
     retirement. In 1996 my wife and I became very discouraged 
     with the manner in which our Franchisor, which is a wholely 
     owned subsidiary of a foreign corporation, was treating its 
     franchisees. After careful consideration and after seeing 
     sales at our fellow franchisee's stores plummet as a result 
     of the placement of new stores and drastic changes to the 
     system which we had originally purchased, we decided to sell 
     our store.
       In February of 1997, three months after notifying Baskin-
     Robbins that we were interested in selling our store, we 
     received a notification that Baskin-Robbins was considering a 
     location for a new store located in a shopping mall, a mere 
     two miles from my store and well within the market from which 
     we draw a large number of our customers.
       Later that month my wife and I met with our district 
     manager to discuss our ability to sell our store and the 
     tremendous impact the new store would have on our existing 
     store. To our surprise the representative from Baskin-Robbins 
     agreed with us, and suggested that if Baskin-Robbins were to 
     go forward with this plan, how would we feel if they were to 
     purchase our store, and then sell both our store and the new 
     store as a package to a new buyer? We agreed that this would 
     be acceptable to us. Whereafter, the Baskin-Robbins 
     representative offered us $40,000 dollars less than what I 
     had paid for this store seven years earlier, and after an 
     additional $70,000 dollars I paid for improvements which were 
     required by Baskin-Robbins. We were appalled at this offer, 
     but were advised by the Baskin-Robbins representative that we 
     really should considert his offer, because if Baskin-Robbins 
     does elect to place this new store at the proposed location, 
     our store wouldn't even be worth that amount.
       Thereafter in April of 1997, and pursuant to an internal 
     policy of Baskin-Robbins, which is not binding on Baskin-
     Robbins, and which is rarely followed by the company, I 
     submitted to my district manager my response to this Baskin-
     Robbins proposed new location. He assured me that he would 
     notify me of any developments as they occur, and that we 
     would be notified promptly, once a determination had been 
     made.
       In June of 1997, after several unsuccesfull attempts to 
     learn whether Baskin-Robbins would proceed with the new store 
     my wife called our district manager and explained to him that 
     we needed immediate information on what the company intends 
     to do about this new site, because we have had several 
     prospective buyers for our store that were disinterested once 
     we disclosed to them Baskin-Robbin's plan. The Baskin-Robbins 
     representative advised us not to disclose the information 
     about the new store to our prospective buyers.
       In July of 1997, our local neighborhood magazine 
     publications reported that a new Baskin-Robbins would be open 
     two miles from our store. We were shocked. Two days after 
     this news story appeared, and after numerous telephone calls 
     to Baskin-Robbins on our part, we finally received official 
     notification from Baskin-Robbins about the new store.
       We later learned that Baskin-Robbins signed the lease for 
     this new store on May 13, 1997.
       On August 5, 1997, after the underhandedness that we had 
     felt from Baskin-Robbins, my wife and I decided that in our 
     best interest we should retain legal representation to help 
     us resolve the matter with Baskin-Robbins regarding the 
     encroachment issue and the subsequent issue of our inability 
     to sell our store.
       In June of 1998 the new store opened, with their grand 
     opening celebration following in August. As you can see on 
     the enclosed charts, sales at our store have drastically 
     declined as a result, and have effectively terminated our 
     ability to sell the store at a reasonable price.
       While attempting to resolve matters through our attorney, 
     Baskin-Robbins has become increasingly hostile towards us. 
     They have begun arbitrarily rating us as ``C'' franchisees, 
     when in the past, we had always

[[Page 31247]]

     maintained an ``A'' or ``B'' rating. In addition, they have 
     brought against us a lawsuit, contending that we were poor 
     operators. One week before the inspection that is the basis 
     for their lawsuit however, a mystery shopper trained and 
     employed by Baskin-Robbins rated our operation superior, as 
     did the LA county Health Inspector.
       In closing, I would ask your full support in addressing the 
     obvious imbalance in the relationship between franchisor and 
     franchisee through legislation. I am one Franchisee of many 
     that are so frustrated in the way that we are literally 
     forced to do business. Many franchisees I now that have lost 
     their businesses, are going to lose their businesses, or are 
     just plain hanging in there because there's nothing else they 
     can do. I am extremely fortunate that I have another 
     profession to fall back onto, while others suffer from 
     intimidation, or being afraid to stand up and say anything, 
     for fear that they will be strong-armed into submission, as 
     Baskin-Robbins has attempted to do me. Please give us the 
     tools that we need to survive in this giant corporate world, 
     so that us little guys can continue making those big guys who 
     they are. Thank you.

     

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