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Bill passes Senate that would regulate franchise agreements

Brandon Moseley

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The Alabama state Senate passed a bill Thursday to regulate franchise agreements. Many businesses are locally owned and operated but are part of a national chain. Those contracts are generally written by the franchisor that owns the brand in their home state.

Senate Bill 129, the Protect Alabama Small Business Act, is sponsored by State Sen. Chris Elliott, R-Fairhope.

SB129 would regulate private franchise contracts by codifying them in to Alabama state law. In case of disagreement between the franchisor and franchisee, the case would have to be litigated in the Alabama Court system rather than in the state of the franchisor.

The House companion bill, HB352, is sponsored by State Rep. Connie Rowe, R-Jasper.

The Alabama business community is bitterly divided on this issue.

Dom Gentile owns Jan Pro franchises in Birmingham and Huntsville, but his contract is such that he controls the Alabama franchise rights and could franchise out to other cities in Alabama.

“I am a franchisee and a franchisor,” Gentile told the Alabama Political Reporter. “The franchise agreement allows the franchiser to protect the brand. I don’t want to sell franchises if I can’t protect the quality of the brand.”

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The Alabama Franchisee Association supports the legislation and argues that franchisees need protection from unjust terminations and non-renewals without good cause, protection from unjust restrictions on sales and transfers, protecting the franchisees’ rights to pursue legal dispute with their franchisor in an Alabama Court under Alabama law and requiring that franchisors and franchisees must act in good faith and in a commercially reasonable manner.

The International Franchise Association opposes the legislation.

“This legislation undermines the very key to franchising – a brand’s standards of safety, quality and operation. These brand standards signal to consumers they can expect the same safety, consistency and quality of a product or service regardless of the business location. By placing these brand standards at risk, SB129 and HB352 will actually hurt the majority of Alabama’s existing franchise small business owners and their customers.”

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This letter was signed by more than 80 franchise brands, including Hilton, Chicken Salad Chick, The UPS Store, and McDonald’s.

“Through contact with the Alabama Franchisee Association, I learned that scores of Alabama businesses — both small and large — have essentially no rights and no protections,” Elliott, who is sponsoring SB129. wrote. “It has been a ‘take it or leave it’ proposition, with franchisees having to take on more and more at each contract renewal.”

“I hope state legislators listen to all franchise owners and not just a disgruntled few, and vote against HB352, the ‘Protect Alabama Small Business Act.’ The only thing Alabama small business owners like me need to be protected from is this bill,” said Daniel Morgan, the owner of Express Pros in Birmingham.

“I recently met Darrel Bush, whose family had operated the Huddle House in Wetumpka for more than 25 years,” Elliott wrote. “As the years went by, unreasonably priced building and equipment upgrades were added to the extensions of the original contract, and the Bush family had no choice but to agree to the franchisor’s demands in order to stay afloat. Ultimately, the Bush family had to shut down its franchise. Huddle House is now looking to construct a new location just down the road from the one the Bush family operated for a quarter century.”

“The legislation basically upends the franchise system,” said David Barr, the owner of 18 Alabama KFCs and Taco Bells. “If it passes, it will wrap small businesses in reams of red tape and fundamentally redefine the entire franchise model. Practices that have worked for decades will suddenly become illegal. In particular, there will be new restrictions on when – and whether – brands and small businesses can part ways. This is a huge payday for trial lawyers, who will be able to file bogus lawsuits to their heart’s content.”

The International Franchise Association points to economic analysis by FRANdata claiming that if this legislation is enacted, from 2019-2022 427 franchise businesses will not open, 4,500 jobs will not be created, and Alabama will lose $352.2 million in economic activity and that over the next 14 years, the trend: 1,141 franchise businesses will not open, 12,000 jobs will not be created, and Alabama will lose $942.1 million in economic activity — nearly a billion dollars taken from Alabama’s economy.

Gentile, a former Republican candidate for U.S. Senate, told APR that Republicans are supposed to be for small government and for less regulation.

There were 12,400 franchises operating in Alabama in 2018. 128,800 Alabamians work for a franchise, for a total 2018 payroll of $4 billion, which is up 5.4 percent from 2017. Franchises in Alabama have a total economic output of $10.2 billion. 76 percent of Alabamians have a favorable view of franchises.

SB129 was passed by the Senate on a 21 to 2 vote. It is now awaiting action by the Alabama House of Representatives.

It’s House companion bill, HB352, received a favorable report from the House Commerce and Small Business Committee. It is waiting for action by the full House of Representatives.

For coverage of the public hearing on this:

Committee considers legislation to regulate franchise agreements

Brandon Moseley is a senior reporter with eight and a half years at Alabama Political Reporter. You can email him at [email protected] or follow him on Facebook. Brandon is a native of Moody, Alabama, a graduate of Auburn University, and a seventh generation Alabamian.

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Corruption

Former State Sen. David Burkette pleads guilty, avoids jail

Josh Moon

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Former Alabama Sen. David Burkette

Former State Sen. David Burkette will avoid jail time and be sentenced to a 30-day suspended sentence as part of a plea deal reached on Monday. 

Burkette, who pleaded guilty to one count of violating the Fair Campaign Practices Act, will also have to pay a $3,000 fine and serve 12 months of probation as part of the deal. He was sentenced in Montgomery Circuit Court on Monday after being charged two weeks ago with failing to deposit more than $3,600 in contributions into campaign accounts — a misdemeanor.

He also resigned his seat in the Alabama Senate as part of the plea deal. 

“I’m just happy to still be here,” Burkette told the court following his sentencing, according to multiple media reports. 

The former senator suffered a stroke in 2018 and has been confined to a wheelchair since. His current health status played a role in his sentence considerations. 

The charges against Burkette stem from a series of complaints filed against him with the Alabama Ethics Commission — all of them related to various issues during his time on the Montgomery City Council. The charge for which he pleaded guilty occurred in 2015.

The Ethics Commission referred numerous charges to the Alabama attorney general’s office, according to sources familiar with the investigation of Burkette, but the attorney general’s office elected to charge Burkette with only the misdemeanor as part of the deal that saw him resign. 

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“Candidates for public office at the state, county and municipal levels must comply with the State’s Fair Campaign Practices Act,” said Attorney General Steve Marshall. “Personally profiting from campaign funds erodes public confidence in the system and will not be tolerated.”

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Legislature

Former state senator arrested on charges of violating campaign finance laws

Josh Moon

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Former State Sen. David Burkette

David Burkette has been officially arrested. The former state senator from Montgomery, who resigned on Tuesday as part of a plea deal with the Alabama Attorney General’s Office, was formally charged on Thursday with a single misdemeanor count of violating the Fair Campaign Practices Act. 

According to a press release from the AG’s office, Burkette’s charge stems from him depositing campaign donations into his personal account instead of into his campaign accounts, as required by the FCPA. The alleged crimes occurred in 2015 and 2016 when Burkette was serving on the Montgomery City Council. 

The complaint alleged that, in 2015 and 2016 while running for the Montgomery City Council, Burkette intentionally failed to deposit $3,625.00 in campaign contributions into his campaign checking account, and instead, deposited or cashed those contributions into or against his personal bank account,” the AG’s release stated. 

The single misdemeanor charge is surprising given the lengthy list of allegations against Burkette submitted to the Alabama Ethics Commission. APR obtained a copy of the original report, which was submitted in October 2018. 

In addition to more than $40,000 in allegedly improperly spent council discretionary funds that were flagged by auditors for the city of Montgomery, Burkette was also accused of inappropriately donating tens of thousands more to suspect charities and two sororities, including his wife’s.

The Ethics Commission referred Burkette’s case to the AG’s Office in October 2019.

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Legislature

Pro-Growth Conference kicks off with Doug Jones, discussions on COVID impact and a living wage

Josh Moon

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Sen. Doug Jones speaks on the floor of the U.S. Senate. (VIA CSPAN)

What happens if you just give impoverished citizens $500 per month — no strings attached? Good things, it turns out. The people use that income to buy food, medicine and basic necessities for life. They take a day off work if they’re sick and actually get treatment. They quit a second, hourly-wage job that they are overqualified for and instead work towards obtaining a better, higher-paying primary job. 

These are things that the city of Stockton, California, has learned in its year-long living wage program.

The program, while limited in size — only 125 people — has proven to be a larger success than city officials had hoped, and it has opened their eyes to a new, more proactive style of governance, Stockton Mayor Michael Tubbs told Alabama elected officials. 

Tubbs was the featured speaker on Tuesday at the first day of the Pro-Growth Policy Conference, a three-day forum for Alabama elected leaders with guest speakers from around the country offering tips and best practices. 

The first day of the conference began with an opening talk from Sen. Doug Jones, who pressed the need for Medicaid expansion and how expansion has aided other red states. Jones also highlighted the need for broadband expansion and talked about a bill he has in the Senate that would create a broadband main office and dish out about $20 million in money for affordable access.

“Now (with COVID), we know how needed it really is,” Jones said. “We see the homework gap that we have. We know there’s a need for more telemedicine. My bill would consolidate in one office all of the monies for broadband … and provide affordable access.”

Jones said the current COVID pandemic has highlighted just how badly we need better access to broadband in Alabama, and a major area of concern right now is healthcare. 

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Highlighting that point, Brandon Garrett, the chief operating officer of the National Minority Quality Forum, and Dr. LaTasha Lee, the vice-president of social and clinical research, demonstrated the many ways in which inequality in health care and health care options is harming impoverished communities. 

A number of factors play into that inequality, but a lack of access to updated means of communication and tools is one of the biggest. 

“(Dr. Martin Luther King Jr.) said that, ‘Of all the forms of inequality, injustice in health care is the most shocking and inhumane because it results in physical death,’” Lee said. “That’s what we’re seeing currently with COVID-19 and sickle cell disease. These two diseases are affecting the minority community and causing death, and they make a great argument that such health care disparities really are a social justice issue.”

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Correcting such issues was one of the goals of Stockton’s living wage experiment. Now, Tubbs said, a working person can afford to stay home or get tested if they’re feeling symptomatic, whereas before that person — scared of missing a paycheck or losing the job altogether — might come to work with the virus and infect an entire workplace. 

That alone, Tubbs said, has restored dignity to a number of residents. 

“This is not easy, especially with budgets the way they are,” Tubbs said. “But I don’t know how we continue to live with the status quo as it is.

“I think part of being a leader, as we are, is having the courage to do something about what we’re seeing. We have to be able to do that.”

The Pro-Growth Policy Conference will run both Wednesday and Thursday, 10 a.m. until 2 p.m. Wednesday’s round of conferences will focus on state grants, economic development around the state and what the 2021 legislative session might look like. 

On Thursday, the event will wrap up with talks by the Equal Justice Initiative’s Bryan Stevenson and Alabama Congresswoman Terri Sewell.

 

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Elections

Russell Bedsole wins Republican runoff in HD49

Brandon Moseley

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House District 49 Republican nominee Russell Bedsole

As of press time, it appears that Russell Bedsole has won a narrow victory over Mimi Penhale in the special Republican primary runoff election in Alabama House District 49.

At press time, Bedsole had a 166-vote lead in unofficial results on the secretary of state’s website.

“We won,” Bedsole declared on social media.

Bedsole is an Alabaster city councilman and a Shelby County Sheriff’s Department captain.

“Sadly, tonight did not turn out in my favor. Despite the loss, I feel like God truly used this opportunity to help me grow in my walk with Him, and gave me the opportunity to increase my testimony,” Penhale said. “I feel so incredibly blessed by the people I have met on this campaign and the experiences I have had. I am disappointed in the outcome, but what an honor it is to have the confidence of 1,183 people across House District 49! Thank you!!”

Russell Bedsole had 1,249 votes, or 51.36 percent, to Mimi Penhale’s 1,183, or 48.64 percent, to win the House District 49 Republican primary runoff.

There were just 2,432 votes cast in the special primary runoff election. Shelby County was the decisive factor in the election. Bedsole won Shelby County with 762 votes, or 71.42 percent, to Penale’s 305 votes.

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Penhale carried Chilton and Bibb Counties, but could not overcome Bedsole’s strong performance in Shelby County.

The provisional ballots will be counted on Sept. 8, 2020, and certification of votes will occur on Sept. 16, 2020.

Bedsole will face Democratic nominee Sheryl Patton in the special general election on Tuesday, Nov. 17, 2020.

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The vacancy in House District 49 was created when State Rep. April Weaver announced her resignation to accept a presidential appointment as a regional director in the Department of Health and Human Services.

In a statement, the Alabama Republican Party thanked “each of the candidates that qualified for offering themselves up for service in the Alabama State House of Representatives.”

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