Would you like your ethics scrambled?

Terry Coleman's franchise bill raises ethics questions

One high-ranking state lawmaker worked on a little something extra for himself last week amid the annual late-session dash to pass bills through one chamber in time to get them through the other.
The Georgia Restaurant Franchise Act appears innocuous enough. It merely regulates agreements between "franchisers" — companies like McDonald's and Burger King — and "franchisees" — the business people who own the chains' individual restaurants.
The bill worked its way March 7 through a mild debate on the House floor, where Minority Leader Lynn Westmoreland complained that the state shouldn't meddle in contracts between businesses.
What didn't come up is that one of the bill's sponsors, Rep. Terry Coleman, could personally benefit from the legislation. Coleman owns two Huddle House franchises, one in his hometown of Eastman, the other in McRae. If the bill were to become law, it would override restaurant-franchise contracts and give franchisees, including Coleman, the upper hand in their relationships with the mother companies.
While the average Georgian's heart may not bleed for multinational chains like McDonald's and Kentucky Fried Chicken, the fact that one of the legislator's most powerful representatives has quietly pushed the bill offers a peek at the seamy underside of the General Assembly. And the legislation itself — those franchisers warn — could slow business growth in Georgia.
Coleman did not respond to repeated requests for interviews, but employees at his Eastman and McRae Huddle Houses confirmed that he owns the two franchises.
The bill would give franchisees three months, instead of just the current standard of one, to correct violations of their contract with the franchiser. That may sound like an arcane detail, but Blimpie's legal counsel Ken Jones says it would give franchises a free ride.
"If this were to happen, franchises could consciously decide to default on the contract and every three months they wouldn't have to pay their royalties," Jones says. "Then on the 89th day, they pay the fees [as outlined in the contract] and be back in good standing. And this could go on and on."
The bill would also skew other common practices of franchising. It would allow franchises to transfer automatically to the survivors of a franchise owner. Usually franchises are taken over by the franchiser until a new owner is found and trained.
Jones argues that franchises would be able to violate — at least, for three months at a time — all kinds of standards established by their corporate brands including serving sizes, health standards and that special look that makes each franchise a carbon-copy of the rest.
"I couldn't in good conscience tell Blimpie's to continue to enter into franchise agreements in Georgia if this were to pass," Jones says. "This is going to eliminate franchises in Georgia."
According to the International Franchise Association, Iowa lawmakers passed a similar bill in 1996, resulting in a 133-company boycott that cost the state 7,531 jobs and millions of dollars in tax revenue.
Jones and other franchise operators didn't even know HB 809 existed until it made it to the Senate — a testament to the power Coleman wields as chairman of the Appropriations Committee. During the most hectic week of the session — when most legislators were scrambling to get their bills safely through committee — the franchise bill blazed through the House at a pace that would make Gov. Roy Barnes jealous. Coleman and an all-star list of high-ranking Democratic House members dropped it into the hopper March 1, and on March 7 — the last day possible for a bill to have time this session to also make it through the Senate — it passed 95-59.
Coleman got up in front of the House, encouraged everyone to vote in favor of it, but it's doubtful that he violated House ethics rules. That's because such rules in Georgia are vague to the point that they seem intentionally confusing.
House voting rules state that each member must vote "unless the member is immediately and particularly interested therein." Ethics rules are slightly more specific. They ban House members from using their office for "personal financial gain."
Coleman did sponsor ethics legislation this year, but his bill would have weakened Georgia's already lax laws. It would have kept State Ethics Commission employees from commenting on pending ethics complaints. The bill stalled out in committee, but it's the thought that counts.
The franchise bill is now in the Senate Finance and Public Utilities committee.