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PAG LIN
1 1 Amend House File 334 as follows:
1 2 #1. Page 3, by inserting after line 14 the
1 3 following:
1 4 "6. a. A franchisee may transfer the franchised
1 5 business and franchise to a transferee, provided that
1 6 the transferee satisfies the reasonable current
1 7 qualifications of the franchisor for new franchisees.
1 8 For the purposes of this subsection, a reasonable
1 9 current qualification for a new franchisee is a
1 10 qualification based upon a legitimate business reason.
1 11 If the proposed transferee does not meet the
1 12 reasonable current qualifications of the franchisor,
1 13 the franchisor may refuse to permit the transfer,
1 14 provided that the refusal of the franchisor to consent
1 15 to the transfer is not arbitrary or capricious.
1 16 b. Except as otherwise provided in this
1 17 subsection, a franchisor may exercise a right of first
1 18 refusal contained in a franchise agreement after
1 19 receipt of a proposal from the franchisee to transfer
1 20 the franchise.
1 21 c. A franchisor may require as a condition of a
1 22 transfer any of the following:
1 23 (1) That the transferee successfully complete a
1 24 reasonable training program.
1 25 (2) That a reasonable transfer fee be paid to
1 26 reimburse the franchisor for the franchisor's
1 27 reasonable and actual expenses directly attributable
1 28 to the transfer.
1 29 (3) That the franchisee pay or make provision
1 30 reasonably acceptable to the franchisor to pay any
1 31 amount due the franchisor or the franchisor's
1 32 affiliate.
1 33 (4) That the financial terms of the transfer
1 34 comply at the time of the transfer with the
1 35 franchisor's current financial requirements for
1 36 franchisees.
1 37 d. A franchisee may transfer the franchisee's
1 38 interest in the franchise, for the unexpired term of
1 39 the franchise agreement, and a franchisor shall not
1 40 require the franchisee or the transferee to enter into
1 41 a new or different franchise agreement as a condition
1 42 of the transfer.
1 43 e. A franchisee shall give the franchisor no less
1 44 than sixty days' written notice of a transfer which is
1 45 subject to the provisions of this subsection, and on
1 46 request from the franchisor shall provide in writing
1 47 the ownership interests of all persons holding or
1 48 claiming an equitable or beneficial interest in the
1 49 franchise subsequent to the transfer or the
1 50 franchisee, as appropriate. A franchisee shall not
2 1 circumvent the intended effect of a contractual
2 2 provision governing the transfer of the franchise or
2 3 an interest in the franchise by means of a management
2 4 agreement, lease, profit-sharing agreement,
2 5 conditional assignment, or other similar device.
2 6 f. A franchisor shall not transfer its interest in
2 7 a franchise unless the franchisor makes reasonable
2 8 provision for the performance of the franchisor's
2 9 obligations under the franchise agreement by the
2 10 transferee. For purposes of this paragraph,
2 11 "reasonable provision" means that upon the transfer,
2 12 the entity assuming the franchisor's obligations has
2 13 the financial means to perform the franchisor's
2 14 obligations in the ordinary course of business, but
2 15 does not mean that the franchisor transferring the
2 16 franchise is required to guarantee obligations of the
2 17 underlying franchise agreement.
2 18 g. A transfer by a franchisee is deemed to be
2 19 approved sixty days after the franchisee submits the
2 20 request for consent to the transfer unless the
2 21 franchisor withholds consent to the transfer as
2 22 evidenced in writing, specifying the reason or reasons
2 23 for withholding the consent. The written notice must
2 24 be delivered to the franchisee prior to the expiration
2 25 of the sixty-day period. Any such notice is
2 26 privileged and is not actionable based upon a claim of
2 27 defamation.
2 28 h. A franchisor shall not discriminate against a
2 29 proposed transferee of a franchise on the basis of
2 30 race, color, national origin, religion, sex, or
2 31 disability.
2 32 i. A franchisor, as a condition to a transfer of a
2 33 franchise, shall not obligate a franchisee to
2 34 undertake obligations or relinquish any rights
2 35 unrelated to the franchise proposed to be transferred,
2 36 or to enter into a release of claims broader than a
2 37 similar release of claims by the franchisor against
2 38 the franchisee which is entered into by the
2 39 franchisor.
2 40 j. A franchisor, after a transfer of a franchise,
2 41 shall not seek to enforce any covenant of the
2 42 transferred franchise against the transferor which
2 43 prohibits the transferor from engaging in any lawful
2 44 occupation or enterprise. However, this paragraph
2 45 does not prohibit the franchisor from enforcing a
2 46 contractual covenant against the transferor not to
2 47 exploit the franchisor's trade secrets or intellectual
2 48 property rights, unless otherwise agreed to by the
2 49 parties.
2 50 k. For purposes of this subsection, "transfer"
3 1 means any change in ownership or control of a
3 2 franchise, franchised business, or a franchisee.
3 3 l. The following occurrences shall not be
3 4 considered transfers requiring the consent of the
3 5 franchisor under a franchise agreement, and shall not
3 6 result in the imposition of any penalties or make
3 7 applicable any right of first refusal by the
3 8 franchisor:
3 9 (1) The succession of ownership of a franchise
3 10 upon the death or disability of a franchisee, or of an
3 11 owner of a franchise, to the surviving spouse, heir,
3 12 or a partner active in the management of the
3 13 franchisee unless the successor fails to meet within
3 14 one year the then current reasonable qualifications of
3 15 the franchisor for franchisees and the enforcement of
3 16 the reasonable current qualifications is not arbitrary
3 17 or capricious.
3 18 (2) Incorporation of a proprietorship franchisee,
3 19 provided that such incorporation does not prohibit a
3 20 franchisor from requiring a personal guaranty by the
3 21 franchisee of obligations related to the franchise.
3 22 (3) A transfer within an existing ownership group
3 23 of a franchise provided that more than fifty percent
3 24 of the franchise is held by persons who meet the
3 25 franchisor's reasonable current qualifications for
3 26 franchisees. If less than fifty percent of the
3 27 franchise would be owned by persons who meet the
3 28 franchisor's reasonable current qualifications, the
3 29 franchisor may refuse to authorize the transfer,
3 30 provided that enforcement of the reasonable current
3 31 qualifications is not arbitrary or capricious.
3 32 (4) A transfer of less than a controlling interest
3 33 in the franchise to the franchisee's spouse or child
3 34 or children, provided that more than fifty percent of
3 35 the entire franchise is held by those who meet the
3 36 franchisor's reasonable current qualifications. If
3 37 less than fifty percent of the franchise would be
3 38 owned by persons who meet the franchisor's reasonable
3 39 current qualifications, the franchisor may refuse to
3 40 authorize the transfer, provided that enforcement of
3 41 the reasonable current qualifications is not arbitrary
3 42 or capricious.
3 43 (5) A transfer of less than a controlling interest
3 44 in the franchise of an employee stock ownership plan,
3 45 or employee incentive plan, provided that more than
3 46 fifty percent of the entire franchise is held by those
3 47 who meet the franchisor's reasonable current
3 48 qualifications for franchisees. If less than fifty
3 49 percent would be owned by persons who meet the
3 50 franchisor's reasonable current qualifications, the
4 1 franchisor may refuse to authorize the transfer,
4 2 provided that enforcement of the reasonable current
4 3 qualifications is not arbitrary or capricious.
4 4 (6) A grant or retention of a security interest in
4 5 the franchised business or its assets, or an ownership
4 6 interest in the franchisee, provided the security
4 7 agreement establishes an obligation on the part of the
4 8 secured party enforceable by the franchisor to give
4 9 the franchisor notice of the secured party's intent to
4 10 foreclose on the collateral simultaneously with notice
4 11 to the franchisee, and a reasonable opportunity to
4 12 redeem the interests of the secured party and recover
4 13 the secured party's interest in the franchise or
4 14 franchised business by paying the secured obligation.
4 15 m. A franchisor shall not interfere or attempt to
4 16 interfere with any disposition of an interest in a
4 17 franchise or franchised business as described in
4 18 paragraph "l", subparagraphs (1) through (6).
4 19 7. a. Except as otherwise provided by this
4 20 section, a franchisor shall not terminate a franchise
4 21 prior to the expiration of its term except for good
4 22 cause. For purposes of this subsection, "good cause"
4 23 is cause based upon a legitimate business reason.
4 24 "Good cause" includes the failure of the franchisee to
4 25 comply with any material lawful requirement of the
4 26 franchise agreement, provided that the termination by
4 27 the franchisor is not arbitrary or capricious when
4 28 compared to the actions of the franchisor in other
4 29 similar circumstances. The burden of proof of showing
4 30 that action of the franchisor is arbitrary or
4 31 capricious shall rest with the franchisee.
4 32 b. Prior to termination of a franchise for good
4 33 cause, a franchisor shall provide a franchisee with
4 34 written notice stating the basis for the proposed
4 35 termination. After service of written notice, the
4 36 franchisee shall have a reasonable period of time to
4 37 cure the default, which in no event shall be less than
4 38 thirty days or more than ninety days. In the event of
4 39 nonpayment of moneys due under the franchise
4 40 agreement, the period to cure need not exceed thirty
4 41 days.
4 42 c. Notwithstanding paragraph "b", a franchisor may
4 43 terminate a franchisee upon written notice and without
4 44 an opportunity to cure if any of the following apply:
4 45 (1) The franchisee or the business to which the
4 46 franchise relates is declared bankrupt or judicially
4 47 determined to be insolvent.
4 48 (2) All or a substantial part of the assets of the
4 49 franchise or the business to which the franchisee
4 50 relates are assigned to or for the benefit of any
5 1 creditor which is subject to chapter 681. An
5 2 assignment for the benefit of any creditor pursuant to
5 3 this subparagraph does not include the granting of a
5 4 security interest in the normal course of business.
5 5 (3) The franchisee voluntarily abandons the
5 6 franchise by failing to operate the business for five
5 7 consecutive business days during which the franchisee
5 8 is required to operate the business under the terms of
5 9 the franchise, or any shorter period after which it is
5 10 not unreasonable under the facts and circumstances for
5 11 the franchisor to conclude that the franchisee does
5 12 not intend to continue to operate the franchise,
5 13 unless the failure to operate is due to circumstances
5 14 beyond the control of the franchisee.
5 15 (4) The franchisor and franchisee agree in writing
5 16 to terminate the franchise.
5 17 (5) The franchisee knowingly makes any material
5 18 misrepresentations or knowingly omits to state any
5 19 material facts relating to the acquisition or
5 20 ownership or operation of the franchise business.
5 21 (6) After three material breaches of a franchise
5 22 agreement occurring within a twelve-month period, for
5 23 which the franchisee has been given notice and an
5 24 opportunity to cure, the franchisor may terminate upon
5 25 any subsequent material breach within the twelve-month
5 26 period without providing an opportunity to cure,
5 27 provided that the action is not arbitrary and
5 28 capricious.
5 29 (7) The franchised business or business premises
5 30 of the franchisee are lawfully seized, taken over, or
5 31 foreclosed by a government authority or official.
5 32 (8) The franchisee is convicted of a felony or any
5 33 other criminal misconduct which materially and
5 34 adversely affects the operation, maintenance, or
5 35 goodwill of the franchise in the relevant market.
5 36 (9) The franchisee operates the franchised
5 37 business in a manner that imminently endangers the
5 38 public health and safety.
5 39 8. a. A franchisor shall not refuse to renew a
5 40 franchise unless both of the following apply:
5 41 (1) The franchisee has been notified of the
5 42 franchisor's intent not to renew at least six months
5 43 prior to the expiration date or any extension of the
5 44 franchise agreement.
5 45 (2) Any of the following circumstances exist:
5 46 (a) Good cause exists, provided that the refusal
5 47 of the franchisor to renew is not arbitrary or
5 48 capricious. For purposes of this subsection, "good
5 49 cause" means cause based on a legitimate business
5 50 reason.
6 1 (b) The franchisor and franchisee agree not to
6 2 renew the franchise.
6 3 (c) The franchisor completely withdraws from
6 4 directly or indirectly distributing its products or
6 5 services in the geographic market served by the
6 6 franchisee, provided that upon expiration of the
6 7 franchise, the franchisor agrees not to seek to
6 8 enforce any covenant of the nonrenewed franchisee not
6 9 to compete with the franchisor or franchisees of the
6 10 franchisor.
6 11 b. As a condition of renewal of the franchise, a
6 12 franchise agreement may require that the franchisee
6 13 meet the then current requirements for franchises and
6 14 that the franchisee execute a new agreement
6 15 incorporating the then current terms and fees for new
6 16 franchises.
6 17 9. A franchisor shall not restrict a franchisee
6 18 from associating with other franchisees or from
6 19 participating in a trade association, and shall not
6 20 retaliate against a franchisee for engaging in these
6 21 activities.
6 22 10. A franchisor shall not prohibit a franchisee
6 23 from, or enforce a prohibition against a franchisee,
6 24 engaging in any lawful business at any location after
6 25 a termination or refusal to renew by a franchisor,
6 26 unless it is one which relies on a substantially
6 27 similar marketing program as the terminated or
6 28 nonrenewed franchise or unless the franchisor offers
6 29 in writing no later than ten business days before
6 30 expiration of the franchise to purchase the assets of
6 31 the franchised business for its fair market value as a
6 32 going concern. The value of the assets shall not
6 33 include the goodwill of the business attributable to
6 34 the trademark licensed to the franchisee in the
6 35 franchise agreement. The offer may be conditioned
6 36 upon the ascertainment of a fair market value by an
6 37 impartial appraiser. This subsection does not apply
6 38 to assets of the franchised business which the
6 39 franchisee did not purchase from the franchisor, or
6 40 the agent of the franchisor.
6 41 11. a. Except as provided in paragraph "b", a
6 42 franchisor shall allow a franchisee to obtain
6 43 equipment, fixtures, supplies, and services used in
6 44 the establishment and operation of the franchised
6 45 business from sources of the franchisee's choosing,
6 46 provided that such goods and services meet standards
6 47 as to their nature and quality promulgated by the
6 48 franchisor.
6 49 b. Paragraph "a" does not apply to reasonable
6 50 quantities of inventory goods or services, including
7 1 display and sample items, that the franchisor requires
7 2 the franchisee to obtain from the franchisor or its
7 3 affiliate, but only if the goods or services are
7 4 central to the franchised business and either are
7 5 actually manufactured or produced by the franchisor or
7 6 its affiliate, or incorporate a trade secret owned by
7 7 the franchisor or its affiliate.
7 8 12. This section does not limit any liability that
7 9 may exist under another statute or at common law.
7 10 Prior law governs all actions based on facts occurring
7 11 before July 1, 1997.
7 12 13. This section shall be liberally construed to
7 13 effectuate its purposes.
7 14 14. If any provision or clause of this section or
7 15 any application of this section to any person or
7 16 circumstances is held invalid, such invalidity shall
7 17 not affect other provisions or applications of the
7 18 section which can be given effect without the invalid
7 19 provision or application, and to this end the
7 20 provisions of this section are declared to be
7 21 severable."
7 22
7 23
7 24
7 25 KREMER of Buchanan
7 26 HF 334.501 77
7 27 mj/jw/5
Text: H01164 Text: H01166 Text: H01100 - H01199 Text: H Index Bills and Amendments: General Index Bill History: General Index
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