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| SB 246 - Georgia Franchise Act - enact |
First Reader Summary
A bill to amend Chapter 1 of Title 10 of the Official Code of
Georgia Annotated, relating to selling and other trade practices,
so as to enact the "Georgia Franchise Act"; to provide a short
title; to provide definitions; to provide for applicability; to
provide for jurisdiction and nonjudicial resolution of disputes;
to provide that certain waivers are void; to provide for the
transfer of a franchise.
| Senate
| Action
| House
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| 2/10/97
| Read 1st time
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SB 246 97 LC 19 3327
SENATE BILL 246
By: Senator James of the 35th
A BILL TO BE ENTITLED
AN ACT
1- 1 To amend Chapter 1 of Title 10 of the Official Code of
1- 2 Georgia Annotated, relating to selling and other trade
1- 3 practices, so as to enact the "Georgia Franchise Act"; to
1- 4 provide a short title; to provide definitions; to provide
1- 5 for applicability; to provide for jurisdiction and
1- 6 nonjudicial resolution of disputes; to provide that certain
1- 7 waivers are void; to provide for the transfer of a
1- 8 franchise; to provide for encroachment; to provide for
1- 9 termination; to provide for nonrenewal of a franchise; to
1-10 provide for a franchise's right to associate; to provide for
1-11 a duty of good faith; to provide for the repurchase of
1-12 assets; to provide for independent sourcing; to provide for
1-13 private civil actions; to provide for choice of law; to
1-14 provide for construction; to provide for severability; to
1-15 provide for related matters; to provide an effective date;
1-16 to repeal conflicting laws; and for other purposes.
1-17 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
1-18 SECTION 1.
1-19 Chapter 1 of Title 10 of the Official Code of Georgia
1-20 Annotated, relating to selling and other trade practices, is
1-21 amended by adding at the end thereof a new Article 34 to
1-22 read as follows:
1-23 10-1-901.
1-24 This article shall be known and may be cited as the
1-25 'Georgia Franchise Act.'
1-26 10-1-902.
1-27 As used in this article, the term:
1-28 (1) 'Affiliate' means a person controlling, controlled
1-29 by, or under common control with another person, every
1-30 officer or director of such a person, and every person
-1-
2- 1 occupying a similar status or performing similar
2- 2 functions.
2- 3 (2) 'Business day' means a day other than a Saturday,
2- 4 Sunday, or federal holiday.
2- 5 (3) 'Franchise' means either of the following:
2- 6 (A) An oral or written agreement, either express or
2- 7 implied, which provides all of the following:
2- 8 (i) Grants the right to distribute goods or provide
2- 9 services under a marketing plan prescribed or
2-10 suggested in substantial part by the franchisor;
2-11 (ii) Requires payment of a franchise fee to a
2-12 franchisor or its affiliate; and
2-13 (iii) Allows the franchise business to be
2-14 substantially associated with a trademark, service
2-15 mark, trade name, logotype, advertisement, or other
2-16 commercial symbol of or designating the franchisor
2-17 or its affiliate; or
2-18 (B) A master franchise.
2-19 The term 'franchise' does not include any business that
2-20 is operated under a lease or license on the premises of
2-21 the lessor or licensor as long as such business is
2-22 incidental to the business conducted by the lessor or
2-23 licensor on such premises, including, without
2-24 limitation, leased departments, licensed departments,
2-25 and concessions; and the leased or licensed department
2-26 operates only under the trademark, trade name, service
2-27 mark, or other commercial symbol designating the lessor
2-28 or licensor. 'Franchise' also does not include any
2-29 contract under which a petroleum retailer or petroleum
2-30 distributor is authorized or permitted to occupy leased
2-31 marketing premises, which premises are to be employed in
2-32 connection with the sale, consignment, or distribution
2-33 of motor fuel under a trademark which is owned or
2-34 controlled by a refiner which is regulated by the
2-35 federal Petroleum Marketing Practices Act, 15 U.S.C.
2-36 Section 2801 et seq. The term 'refiner' means any
2-37 person engaged in the refining of crude oil to produce
2-38 motor fuel and includes any affiliate of such person.
2-39 'Franchise' also does not include a contract
2-40 establishing a franchise relationship with respect to
2-41 the sale of tractors, farm equipment, heavy equipment,
2-42 and motor vehicles.
-2-
3- 1 (4) 'Franchise fee' means a direct or indirect payment
3- 2 to purchase or operate a franchise. Franchise fee does
3- 3 not include any of the following:
3- 4 (A) Payment of a reasonable service charge to the
3- 5 issuer of a credit card by an establishment accepting
3- 6 the credit card;
3- 7 (B) Payment to a trading stamp company by a person
3- 8 issuing trading stamps in connection with a retail
3- 9 sale;
3-10 (C) An agreement to purchase at a bona fide wholesale
3-11 price a reasonable quantity of tangible goods for
3-12 resale;
3-13 (D) The purchase or agreement to purchase, at a fair
3-14 market value, any fixtures, equipment, leasehold
3-15 improvements, real property, supplies, or other
3-16 materials reasonably necessary to enter into or
3-17 continue a business;
3-18 (E) Payments by a purchaser pursuant to a bona fide
3-19 loan from a seller to the purchaser;
3-20 (F) Payment of rent which reflects payment for the
3-21 economic value of leased real or personal property; or
3-22 (G) The purchase or agreement to purchase promotional
3-23 or demonstration supplies, materials, or equipment
3-24 furnished at fair market value and not intended for
3-25 resale.
3-26 (5) 'Franchisee' means a person to whom a franchise is
3-27 granted. Franchisee includes the following:
3-28 (A) A subfranchisor with regard to its relationship
3-29 with a franchisor; and
3-30 (B) A subfranchisee with regard to its relationship
3-31 with a subfranchisor.
3-32 (6) 'Franchisor' means a person who grants a franchise
3-33 or master franchise or an affiliate of such a person.
3-34 Franchisor includes a subfranchisor with regard to its
3-35 relationship with a franchisee, unless stated otherwise
3-36 in this article.
3-37 (7) 'Marketing plan' means a plan or system concerning a
3-38 material aspect of conducting business. Indicia of a
3-39 marketing plan include any of the following:
-3-
4- 1 (A) Price specification, special pricing systems, or
4- 2 discount plans;
4- 3 (B) Sales or display equipment or merchandising
4- 4 devices;
4- 5 (C) Sales techniques;
4- 6 (D) Promotional or advertising materials or
4- 7 cooperative advertising;
4- 8 (E) Training regarding the promotion, operation, or
4- 9 management of the business; or
4-10 (F) Operational, managerial, technical, or financial
4-11 guidelines or assistance.
4-12 (8) 'Master franchise' means an agreement by which a
4-13 person pays a franchisor for the right to sell or
4-14 negotiate the sale of franchises.
4-15 (9) 'Offer' or 'offer to sell' means every attempt to
4-16 offer or to dispose of, or solicitation of an offer to
4-17 buy, a franchise or interest in a franchise for value.
4-18 (10) 'Person' means an individual, partnership,
4-19 corporation, association, trust, estate, or any other
4-20 legal entity.
4-21 (11) 'Sale' or 'sell' means every contract or agreement
4-22 of sale of, contract to sell, or disposition of a
4-23 franchise or interest in a franchise for value.
4-24 (12) 'Subfranchise' means an agreement by which a person
4-25 pays a franchisor for the right to sell or negotiate the
4-26 sale of franchises.
4-27 (13) 'Subfranchisee' means a person who is granted a
4-28 franchise from a subfranchisor.
4-29 (14) 'Subfranchisor' means a person who is granted a
4-30 master franchise.
4-31 10-1-903.
4-32 (a) This article applies to a new or existing franchise
4-33 that is operated in the State of Georgia. For purposes of
4-34 this article, the franchise is operated in this state only
4-35 if the premises from which the franchise is operated are
4-36 physically located in this state. For purposes of this
4-37 article, a franchise including marketing rights in or to
4-38 this state is deemed to be operated in this state only if
4-39 the franchisee's principal business office is physically
-4-
5- 1 located in this state. This article shall not apply to a
5- 2 franchise solely because an agreement relating to the
5- 3 franchise provides that the agreement is subject to or
5- 4 governed by the laws of this state. The provisions of
5- 5 this article shall not apply to any existing or future
5- 6 contracts between Georgia franchisors and franchisees who
5- 7 operate franchises located outside this state.
5- 8 (b) This article shall not be construed to alter any
5- 9 substantative rights in any existing franchise agreement
5-10 which is in writing and which is currently in effect in
5-11 this state, to the extent that such written agreement is
5-12 in direct conflict with any provision of this article.
5-13 However, to the extent that there is no direct conflict
5-14 between any provision of this article and any substantive
5-15 right in an existing written franchise agreement, the
5-16 nonconflicting provisions of this article shall apply.
5-17 This article shall apply to all existing oral franchise
5-18 agreements.
5-19 10-1-904.
5-20 (a) A provision in a franchise agreement restricting
5-21 jurisdiction to a forum outside this state is void with
5-22 respect to a claim otherwise enforceable under this
5-23 article.
5-24 (b) A civil action or proceeding arising out of a
5-25 franchise may be commenced wherever jurisdiction over the
5-26 parties or subject matter exists, even if the agreement
5-27 limits actions or proceedings to a designated
5-28 jurisdiction.
5-29 (c) Parties to a franchise may agree to independent
5-30 arbitration, mediation, or other nonjudicial resolution of
5-31 an existing or future dispute.
5-32 10-1-905.
5-33 A condition, stipulation, or provision requiring a
5-34 franchisee to waive compliance with or relieving a person
5-35 of a duty or liability imposed by or a right provided by
5-36 this article or a rule or order issued under this article
5-37 is void. This Code section shall not affect the
5-38 settlement of disputes, claims, or civil lawsuits arising
5-39 or brought pursuant to this article.
-5-
6- 1 10-1-906.
6- 2 (a) A franchisee may transfer the franchised business and
6- 3 franchise to a transferee, provided that the transferee
6- 4 satisfies the reasonable current qualifications of the
6- 5 franchisor for new or existing franchisees. For the
6- 6 purposes of this Code section, a reasonable current
6- 7 qualification for a new franchisee is a qualification
6- 8 based upon a legitimate business reason. If the proposed
6- 9 transferee does not meet the reasonable current
6-10 qualifications of the franchisor, the franchisor may
6-11 refuse to permit the transfer, provided that the refusal
6-12 of the franchisor to consent to the transfer is not
6-13 arbitrary or capricious.
6-14 (b) Except as otherwise provided in this Code section, a
6-15 franchisor may exercise a right of first refusal contained
6-16 in a franchise agreement after receipt of a proposal from
6-17 the franchisee to transfer the franchise.
6-18 (c) As a condition of a transfer, a franchisor may require
6-19 that:
6-20 (1) The transferee successfully complete a reasonable
6-21 training program;
6-22 (2) A reasonable transfer fee be paid to reimburse the
6-23 franchisor for the franchisor's reasonable and actual
6-24 expenses directly attributable to the transfer;
6-25 (3) The franchisee pay or make provision reasonably
6-26 acceptable to the franchisor to pay any amount due the
6-27 franchisor or the franchisor's affiliate; or
6-28 (4) The financial terms of the transfer comply at the
6-29 time of the transfer with the franchisor's current
6-30 financial requirements for franchisees.
6-31 (d) A franchisee may transfer the franchisee's interest in
6-32 the franchise for the unexpired term of the franchise
6-33 agreement, and a franchisor shall not require the
6-34 franchisee or the transferee to enter into a new or
6-35 different franchise agreement as a condition of the
6-36 transfer.
6-37 (e) A franchisee shall give the franchisor no less than 60
6-38 days' written notice of a transfer which is subject to the
6-39 provisions this Code section and on request from the
6-40 franchisor shall provide in writing the ownership
6-41 interests of all persons holding or claiming an equitable
-6-
7- 1 or beneficial interest in the franchise subsequent to the
7- 2 transfer or the franchisee, as appropriate.
7- 3 (f) A franchisor shall not transfer its interest in a
7- 4 franchise unless the franchisor makes reasonable provision
7- 5 for the performance of the franchisor's obligations under
7- 6 the franchise agreement by the transferee. For purposes
7- 7 of this subsection, 'reasonable provision' means that upon
7- 8 the transfer, the entity assuming the franchisor's
7- 9 obligations has the financial means to perform the
7-10 franchisor's obligations in the ordinary course of
7-11 business but does not mean that the franchisor
7-12 transferring the franchise is required to guarantee
7-13 obligations of the underlying franchise agreement.
7-14 (g) A transfer by a franchisee is deemed to be approved 60
7-15 days after the franchisee submits the request for consent
7-16 to the transfer unless the franchisor withholds consent to
7-17 the transfer as evidenced in writing, specifying the
7-18 reason or reasons for withholding the consent. The
7-19 written notice must be delivered to the franchisee prior
7-20 to the expiration of the 60 day period. Any such notice
7-21 is privileged and is not actionable based upon a claim of
7-22 defamation.
7-23 (h) A franchisor shall not discriminate against a proposed
7-24 transferee of a franchise on the basis of race, color,
7-25 national origin, religion, sex, or disability.
7-26 (i) A franchisor, as a condition to a transfer of a
7-27 franchise, shall not obligate a franchisee to undertake
7-28 obligations or relinquish any rights unrelated to the
7-29 franchise proposed to be transferred or to enter into a
7-30 release of claims broader than a similar release of claims
7-31 by the franchisor against the franchisee which is entered
7-32 into by the franchisor.
7-33 (j) A franchisor, after a transfer of a franchise, shall
7-34 not seek to enforce any covenant of the transferred
7-35 franchise against the transferor which prohibits the
7-36 transferor from engaging in any lawful occupation or
7-37 enterprise. However, this subsection shall not prohibit
7-38 the franchisor from enforcing a contractual covenant
7-39 against the transferor not to exploit the franchisor's
7-40 trade secrets or intellectual property rights, unless
7-41 otherwise agreed to by the parties.
-7-
8- 1 (k) For purposes of this Code section, 'transfer' means
8- 2 any change in ownership or control of a franchise,
8- 3 franchised business, or a franchisee.
8- 4 (l) The following occurrences shall not be considered
8- 5 transfers requiring the consent of the franchisor under a
8- 6 franchise agreement and shall not result in the imposition
8- 7 of any penalties or make applicable any right of first
8- 8 refusal by the franchisor:
8- 9 (1) The succession of ownership of a franchise upon the
8-10 death or disability of a franchisee, or of an owner of a
8-11 franchise, to the surviving spouse, heir, or a partner
8-12 active in the management of the franchisee unless the
8-13 successor fails to meet within one year the then current
8-14 reasonable qualifications of the franchisor for
8-15 franchisees and the enforcement of the reasonable
8-16 current qualifications is not arbitrary or capricious;
8-17 (2) Incorporation of a proprietorship franchisee,
8-18 provided that such incorporation does not prohibit a
8-19 franchisor from requiring a personal guaranty by the
8-20 franchisee of obligations related to the franchise;
8-21 (3) A transfer within an existing ownership group of a
8-22 franchise provided that more than 50 percent of the
8-23 franchise is held by persons who meet the franchisor's
8-24 reasonable current qualifications for franchisees. If
8-25 less than 50 percent of the franchise would be owned by
8-26 persons who meet the franchisor's reasonable current
8-27 qualifications, the franchisor may refuse to authorize
8-28 the transfer, provided that enforcement of the
8-29 reasonable current qualifications is not arbitrary or
8-30 capricious;
8-31 (4) A transfer of less than a controlling interest in
8-32 the franchise to the franchisee's spouse or child or
8-33 children, provided that more than 50 percent of the
8-34 entire franchise is held by those who meet the
8-35 franchisor's reasonable current qualifications. If less
8-36 than 50 percent of the entire franchise would be owned
8-37 by persons who meet the franchisor's reasonable current
8-38 qualifications, the franchisor may refuse to authorize
8-39 the transfer, provided that enforcement of the
8-40 reasonable current qualifications is not arbitrary or
8-41 capricious;
8-42 (5) A transfer of less than a controlling interest in
8-43 the franchise of an employee stock ownership plan or
-8-
9- 1 employee incentive plan, provided that more than 50
9- 2 percent of the entire franchise is held by those who
9- 3 meet the franchisor's reasonable current qualifications
9- 4 for franchisees. If less than 50 percent of the entire
9- 5 franchise would be owned by persons who meet the
9- 6 franchisor's reasonable current qualifications, the
9- 7 franchisor may refuse to authorize the transfer,
9- 8 provided that enforcement of the reasonable current
9- 9 qualifications is not arbitrary or capricious; or
9-10 (6) A grant or retention of a security interest in the
9-11 franchised business or its assets or of an ownership
9-12 interest in the franchisee, provided the security
9-13 agreement establishes an obligation on the part of the
9-14 secured party enforceable by the franchisor to give the
9-15 franchisor notice of the secured party's intent to
9-16 foreclose on the collateral simultaneously with notice
9-17 to the franchisee and a reasonable opportunity to redeem
9-18 the interests of the secured party and to recover the
9-19 secured party's interest in the franchise or franchised
9-20 business by paying the secured obligation.
9-21 (m) A franchisor shall not interfere or attempt to
9-22 interfere with any disposition of an interest in a
9-23 franchise or franchised business as described in
9-24 paragraphs (1) through (6) of subsection (l) of this Code
9-25 section.
9-26 10-1-907.
9-27 (a) If a franchisor develops, or grants to a franchisee
9-28 the right to develop, a new outlet or location which sells
9-29 essentially the same goods or services under the same
9-30 trademark, service mark, trade name, logotype, or other
9-31 commercial symbol as an existing franchisee and the new
9-32 outlet or location has an adverse effect on the gross
9-33 sales of the existing franchisee's outlet or location, the
9-34 existing adversely affected franchisee has a cause of
9-35 action for monetary damages in an amount calculated
9-36 pursuant to subsection (c) of this Code section, unless
9-37 either of the following apply:
9-38 (1) The franchisor has first offered the new outlet or
9-39 location to the existing franchisee on the same basic
9-40 terms and conditions available to the other potential
9-41 franchisee or, if the new outlet or location is to be
9-42 owned by the franchisor, on the terms and conditions
-9-
10- 1 that would ordinarily be offered to a franchisee for a
10- 2 similarly situated outlet or location; or
10- 3 (2) The adverse impact on the existing franchisee's
10- 4 annual gross sales, based on a comparison to the annual
10- 5 gross sales from the existing outlet or location during
10- 6 the 12 month period immediately preceding the opening of
10- 7 the new outlet or location, is determined to have been
10- 8 less than 5 percent during the first 12 months of
10- 9 operation of the new outlet or location.
10-10 (b) In establishing damages under a cause of action
10-11 brought pursuant to this Code section, the franchisee has
10-12 the burden of proving the amount of lost profits
10-13 attributable to the compensable sales. In any action
10-14 brought under this Code section, the damages payable shall
10-15 be limited to no more than five years of the proven lost
10-16 profits. For the purposes of this subsection,
10-17 'compensable sales' means the annual gross sales from the
10-18 existing outlet or location during the 12 month period
10-19 immediately preceding the opening of the new outlet or
10-20 location, less the actual gross sales from the operation
10-21 of the existing outlet or location for the 12 month period
10-22 immediately following the opening of the new outlet or
10-23 location.
10-24 (c) Compensable sales shall exclude any amount
10-25 attributable to factors other than the opening and
10-26 operation of the new outlet or location.
10-27 (d) Upon petition by the franchisor the franchisee, the
10-28 district court may grant a permanent or preliminary
10-29 injunction to prevent irreparable injury or threatened
10-30 injury for a violation of this Code section.
10-31 10-1-908.
10-32 (a) Except as otherwise provided by this article, a
10-33 franchisor shall not terminate a franchise prior to the
10-34 expiration of its term except for good cause. For the
10-35 purposes of this section, 'good cause' is cause based upon
10-36 a legitimate business reason. 'Good cause' includes the
10-37 failure of the franchisee to comply with any material
10-38 lawful requirement of the franchise agreement, provided
10-39 that the termination by the franchisor is not arbitrary or
10-40 capricious when compared to the actions of the franchisor
10-41 in other similar circumstances. The burden of proof of
10-42 showing that action of the franchisor is arbitrary or
10-43 capricious shall rest with the franchisee.
-10-
11- 1 (b) Prior to termination of a franchise for good cause, a
11- 2 franchisor shall provide a franchisee with written notice
11- 3 stating the basis for the proposed termination. After
11- 4 service of written notice, the franchisee shall have a
11- 5 reasonable period of time to cure the default, which in no
11- 6 event shall be less than 60 days. In the event of
11- 7 nonpayment of moneys due under the franchise agreement,
11- 8 the period to cure shall be no less than 30 days. The
11- 9 franchisor has an obligation and duty to act in good faith
11-10 when declaring a franchisee in default. Moreover, the
11-11 franchisor may not declare a franchisee in default when
11-12 doing so would be arbitrary and capricious when compared
11-13 to the actions of the franchisor in other similar
11-14 circumstances.
11-15 (c) Notwithstanding subsection (b) of this Code section, a
11-16 franchisor may terminate a franchisee upon written notice
11-17 and without an opportunity to cure if any of the following
11-18 apply:
11-19 (1) All or a substantial part of the assets of the
11-20 franchise or the business to which the franchisee
11-21 relates are assigned to or for the benefit of any
11-22 creditor. An assignment for the benefit of any creditor
11-23 pursuant to this paragraph does not include the granting
11-24 of a security interest in the normal course of business;
11-25 (2) The franchisee voluntarily abandons the franchise by
11-26 failing to operate the business for five consecutive
11-27 days during which the franchisee is required to operate
11-28 the business under the terms of the franchise or any
11-29 shorter period after which it is not unreasonable under
11-30 the facts and circumstances for the franchisor to
11-31 conclude that the franchisee does not intend to continue
11-32 to operate the franchise, unless the failure to operate
11-33 is due to circumstances beyond the control of the
11-34 franchisee;
11-35 (3) The franchisor and franchisee agree in writing to
11-36 terminate the franchise;
11-37 (4) The franchisee knowingly makes any material
11-38 misrepresentations or knowingly omits to state any
11-39 material facts relating to the acquisition or ownerhsip
11-40 or operation of the franchise business;
11-41 (5) After three material breaches of a franchise
11-42 agreement occurring within a 12 month period for which
11-43 the franchisee has been given notice and an opportunity
-11-
12- 1 to cure, the franchisor may terminate upon any
12- 2 subsequent material breach within the 12 month period
12- 3 without providing an opportunity to cure, provided that
12- 4 the action is not arbitrary and capricious;
12- 5 (6) The franchised business or business premises of the
12- 6 franchisee are lawfully seized, taken over, or
12- 7 foreclosed by a government authority or official;
12- 8 (7) The franchisee is convicted of a felony or any other
12- 9 criminal misconduct which materially and adversely
12-10 affects the operation, maintenance, or goodwill of the
12-11 franchise in the relevant market; or
12-12 (8) The franchisee operates the franchised business in a
12-13 manner that imminently endangers the public health and
12-14 safety. The franchisor has an obligation and duty to
12-15 act in good faith when declaring a franchisee terminated
12-16 under this paragraph. Moreover, the franchisor may not
12-17 declare a franchisee terminated under this paragraph
12-18 when doing so would be arbitrary and capricious when
12-19 compared to the actions of the franchisor in other
12-20 similar circumstances.
12-21 10-1-909.
12-22 (a) A franchisor shall not refuse to renew a franchise
12-23 unless both of the following apply:
12-24 (1) The franchisee has been notified of the franchisor's
12-25 intent not to renew at least six months prior to the
12-26 expiration date or any extension of the franchise
12-27 agreement; and
12-28 (2) Any of the following circumstances exist:
12-29 (A) Good cause exists, provide that the refusal of the
12-30 franchisor to renew is not arbitrary or capricious.
12-31 For purposes of this Code section, 'good cause' means
12-32 cause based on a legitimate business reason;
12-33 (B) The franchisor and franchisee agree not to renew
12-34 the franchise; or
12-35 (C) The franchisor completely withdraws from directly
12-36 or indirectly distributing its products or services in
12-37 the geographic market served by the franchisee,
12-38 provided that upon expiration of the franchise, the
12-39 franchisor agrees not to seek to enforce any covenant
12-40 of the nonrenewed franchisee not to compete with the
12-41 franchisor or franchisees of the franchisor.
-12-
13- 1 (b) As a condition of renewal of the franchise, a
13- 2 franchise agreement may require that the franchisee meet
13- 3 the then current requirements for franchises and that the
13- 4 franchisee execute a new agreement incorporating the then
13- 5 current terms and fees for new franchises.
13- 6 10-1-910.
13- 7 A franchisor shall not restrict a franchisee from
13- 8 associating with other franchisees or from participating
13- 9 in a trade association and shall not retaliate against a
13-10 franchisee for engaging in these activities.
13-11 10-1-911.
13-12 A franchise imposes on the parties a duty of good faith in
13-13 performance and enforcement of the franchise agreement.
13-14 As used in this Code section, 'Good faith' means honesty
13-15 in fact and the observance of reasonable commercial
13-16 standards of fair dealing in the trade.
13-17 10-1-912.
13-18 (a) A franchisor shall not prohibit a franchisee from, or
13-19 enforce a prohibition against a franchisee for, engaging
13-20 in any lawful business at any location after a termination
13-21 or refusal to renew by a franchisor, unless it is one
13-22 which relies on a substantially similar marketing program
13-23 as the terminated or nonrenewed franchise or unless the
13-24 franchisor offers in writing no later than ten business
13-25 days before expiration of the franchise to purchase the
13-26 assets of the franchised business for its fair market
13-27 value as a going concern. The value of the assets shall
13-28 not include the goodwill of the business attributable to
13-29 the trademark licensed to the franchisee in the franchise
13-30 agreement. The offer may be conditioned upon the
13-31 ascertainment of a fair market value by an impartial
13-32 appraiser.
13-33 (b) If the premises upon which a franchise is located are
13-34 leased to the franchisee by the franchisor or any
13-35 affiliate, subsidiary, or agent of the franchisor, then
13-36 the lease agreement may not contain a cross-default
13-37 provision such that the mere termination of the franchise
13-38 agreement creates a termination of the lease agreement.
13-39 So long as the franchisee is in compliance with those
13-40 terms of the lease agreement that are not related to or
13-41 tied to the franchise business, the franchisee may use the
13-42 property for any use set forth in subsection (a) of this
-13-
14- 1 Code section. In the event the franchisor seeks to
14- 2 purchase the assets of the business pursuant to subsection
14- 3 (a) of this Code section, the value of the assets shall
14- 4 include the fair market value of the leasehold interest.
14- 5 10-1-913.
14- 6 (a) Except as provided in subsection (b) of this Code
14- 7 section, a franchisor shall allow a franchisee to obtain
14- 8 equipment, fixtures, supplies, and services used in the
14- 9 establishment and operation of the franchised business
14-10 from sources of the franchisee's choosing, provided that
14-11 such goods and services meet standards as to their nature
14-12 and quality promulgated by the franchisor.
14-13 (b) The provisions of subsection (a) of this Code section
14-14 shall not apply to reasonable quantities of inventory
14-15 goods or services, including display and sample items,
14-16 that the franchisor requires the franchisee to obtain from
14-17 the franchisor or its affiliate, but only if the goods or
14-18 services are central to the franchised business and either
14-19 are actually manufactured or produced by the franchisor or
14-20 its affiliate or incorporate a trade secret owned by the
14-21 franchisor or its affiliate.
14-22 10-1-914.
14-23 In selling or establishing a franchise, a franchisor or
14-24 its agent shall not misrepresent:
14-25 (1) By failure to disclose or otherwise the known
14-26 required total investment of a franchise;
14-27 (2) Or fail to disclose efforts, plans, or intentions to
14-28 sell or establish more franchises than it is reasonable
14-29 to expect the market or market area for the particular
14-30 franchise opportunity to sustain;
14-31 (3) Or fail to disclose efforts, plans, or intentions to
14-32 sell or establish other franchises within the market or
14-33 market area;
14-34 (4) The training and management assistance available to
14-35 the franchisee;
14-36 (5) The amount of profits, net or gross, which the
14-37 franchisee can expect from the operation of the
14-38 franchise business;
14-39 (6) The prospects or chances for success of a proposed
14-40 or existing franchise; or
-14-
15- 1 (7) Or fail to disclose a material fact or create a
15- 2 false or misleading impression in the sale of a
15- 3 franchise.
15- 4 10-1-915.
15- 5 A franchisor shall not discriminate on the basis of race,
15- 6 color, national origin, religion, sex, or disability
15- 7 against a franchisee or potential franchisee in entering
15- 8 into a franchise agreement, providing franchise
15- 9 opportunities, and in interpreting, fulfilling,
15-10 exercising, or otherwise carrying out any obligation,
15-11 right, or duty under any franchise agreement or franchise
15-12 relationship.
15-13 10-1-916.
15-14 A person who violates a provision of this article or order
15-15 issued under this article shall be liable for damages
15-16 caused by the violation, including but not limited to
15-17 costs and reasonable attorneys' and experts' fees and
15-18 shall be subject to other appropriate relief, including
15-19 injunctive and other equitable relief. The parties shall
15-20 have a right to a jury trial on any action for damages for
15-21 violation of this article. If the finder of fact
15-22 determines that the violation by the franchisor was in bad
15-23 faith, wanton, willful, or in reckless disregard of the
15-24 rights of the franchisee, the court shall award the
15-25 franchisee treble damages. No punitive damages shall be
15-26 awarded under this article.
15-27 10-1-917.
15-28 A condition, stipulation, or provision requiring the
15-29 application of the law of another state in lieu of this
15-30 article is void.
15-31 10-1-918.
15-32 This article shall be liberally construed to effectuate
15-33 its purposes.
15-34 10-1-919.
15-35 This article shall not be construed to limit any liability
15-36 that may exist under another statute or at common law."
15-37 SECTION 2.
15-38 This Act shall become effective on July 1, 1997.
-15-
16- 1 SECTION 3.
16- 2 All laws and parts of laws in conflict with this Act are
16- 3 repealed.
-16-
Clerk of the House
Robert E. Rivers, Jr., Clerk
Last Updated on 04/20/98