,i #aaeth ,,congress #ast ,session ,h4 ,r4 #dgj ,,in ,,the ,,house ,,of ,,representatives ,january #ab1 #bjag,mr4 ,ellison 7for himself1 ,mr4 ,huffman1 ,mr4 ,conyers1 and ,ms4 ,mc,collum7 introduced the following bill2 which was referred to the ,committee on the ,judiciary ,a ,,bill ,to establish minimum standards of fair conduct in franchise sales and franchise business relationships1 and for other purposes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,fair ,franchise ,act of #bjag4 7b7 ,table of contents ,the table of contents of this ,act is the following3 ,sec4 #a4 ,short title2 table of contents4 ,sec4 #b4 ,findings and purpose4 ,sec4 #c4 ,unfair franchise practices4 ,sec4 #d4 ,standards of conduct4 ,sec4 #e4 ,procedural fairness4 ,sec4 #f4 ,transfer of a franchise4 ,sec4 #g4 ,renewal of the franchise2 notice4 ,sec4 #h4 ,termination2 good cause2 notice2 opportunity to cure4 ,sec4 #i4 ,effect of termination4 ,sec4 #aj4 ,transfer of franchise by franchisor4 ,sec4 #aa4 ,private right of action4 ,sec4 #ab4 ,scope and applicability4 ,sec4 #ac4 ,definitions4 ,sec4 #ad4 ,severability4 ,sec4 #ae4 ,state attorneys general4 #b4 ,findings and purpose 7a7 ,findings ,congress finds the following3 7#a7 ,franchise businesses represent a large and growing segment of the ,nation's retail and service businesses and are rapidly replacing more traditional forms of small business ownership in the ,american economy4 7#b7 ,franchise businesses involve a joint enterprise between the franchisor and franchisees in which each party has a vested interest in the success of the franchised business4 7#c7 ,most prospective franchisees lack bargaining power and generally invest substantial amounts to obtain a franchise business when they are unfamiliar with operating a business1 with the business being franchised1 and with industry practices in franchising4 7#d7 ,franchisees invest a substantial amount of their own money1 take loans 7often secured by their own home and retirement accounts1 and the ,american taxpayer via loans guaranteed by the ,small ,business ,administration71 and enter into long-term commercial leases and other obligations for the franchise businesses in order to support themselves and their families4 7#e7 ,franchise agreements reflect a profound imbalance of contractual power in favor of the franchisor1 and fail to give due regard to the legitimate business interests of the franchisee1 as a result of the franchisor reserving one-sided and pervasive contractual rights over the franchise relationship4 7#f7 ,franchisees may suffer substantial financial losses when the franchisor does not provide truthful or complete information regarding the franchise opportunity1 or where the franchisor does not act in good faith or in a commercially reasonable manner in the performance of the franchise agreement4 7#g7 ,unlike investments in securities1 an investment in a franchise may lead to substantial additional losses well beyond the initial capital investment4 ,unlike employment1 due to long-term contractual and lease obligations1 franchisees generally cannot simply resign and leave the franchised business without substantial liabilities4 7#h7 ,traditional common law doctrines have not evolved sufficiently to protect franchisees adequately from fraudulent or unfair practices in the sale and operation of franchise businesses1 and significant contractual and procedural restrictions have denied franchisees adequate legal recourse to protect their interests in such businesses4 7#i7 ,contractual obligations of the franchisee to the franchisor may create an environment that makes it difficult to pay workers significantly above minimum wage or provide reasonable benefits to workers4 7#aj7 ,a franchisee's freedom to achieve a contract negotiated at arm's length is greatly limited by the disparity of bargaining power1 lack of consistent legal standards1 and other factors described above4 ,this ,act is necessary to restore true freedom to contract1 and to improve the living standards of employees of franchises4 7#aa7 ,the ,federal ,government has had a significant interest in regulating franchising and has regulated franchising for over #dj years through the ,federal ,trade ,commission and its ,franchise ,rule4 7b7 ,purpose ,it is the purpose of this ,act to-- 7#a7 promote the compelling interest of the public in fair business relations between franchisees and franchisors2 7#b7 protect franchisees against unfair treatment by franchisors1 who inherently have superior economic power and superior bargaining power in the negotiation of the terms and conditions of the franchise relationship2 7#c7 provide franchisees with rights and remedies in addition to those existing by contract or common law2 7#d7 govern franchise agreements1 including any renewals or amendments1 to the full extent consistent with the ,constitution of the ,united ,states2 and 7#e7 create an environment that gives franchisees opportunity to thrive1 therefore having the opportunity to provide better wages and benefits to their employees4 #c4 ,unfair franchise practices 7a7 ,misrepresentations in required disclosure ,in connection with any disclosure document1 notice1 or report required by any ,federal1 ,state1 or local law1 it shall be unlawful for any franchise seller1 either directly or indirectly through another person-- 7#a7 to-- 7,a7 make an untrue statement of material fact2 7,b7 fail to state a material fact2 or 7,c7 fail to state any fact which would render any required statement or disclosure either untrue or misleading2 and 7#b7 fail to furnish any prospective franchisee with-- 7,a7 all information required to be disclosed by law and at the time and in the manner required2 7,b7 a written statement specifying1 prominently and in not less than #ad-point type1 whether the franchise agreement involved contains a right to renew such agreement2 and 7,c7 historical financial performance data including sales1 expenses1 and profitability data1 in the disclosure document or to make any claim or representation to a prospective franchisee whether orally or in writing1 which is inconsistent with1 or which contradicts1 the franchisor's disclosure document4 7b7 ,deceptive and discriminatory practices ,in connection with the performance1 enforcement1 renewal1 or termination of any franchise agreement1 it shall be unlawful for a franchisor or subfranchisor1 either directly or indirectly through another person1 to do any of the following3 7#a7 ,to engage in an act1 practice1 course of business1 or pattern of conduct which operates as a fraud upon any person4 7#b7 ,to hinder1 prohibit1 or penalize 7or threaten to hinder1 prohibit1 or penalize71 directly or indirectly1 the free association of franchisees for any lawful purpose1 including the formation of or participation in any trade association made up of franchisees or of associations of franchisees4 7#c7 ,to discriminate against a franchisee by imposing requirements not imposed on other similarly situated franchisees4 7#d7 ,to otherwise retaliate1 directly or indirectly1 against any franchisee for membership or participation in a franchisee association4 7#e7 ,to charge excessive and unreasonable renewal fees4 ,fees shall not be deemed excessive and unreasonable if they do not exceed #ej percent of the amount of the average initial franchise fee or other required payments then being charged to all franchisees in the market4 7#f7 ,to enforce a clause or provision in a franchise agreement requiring the parties to submit to arbitration unless the parties1 each being represented by counsel1 have voluntarily entered into an agreement after the dispute arises to submit the dispute to arbitration1 and then only if the arbitration is conducted at a location reasonably convenient to the franchisee2 provided1 however1 that the provisions of this subsection shall not prohibit the enforceability of a clause or provision in a franchise agreement which requires the parties to submit to nonbinding mediation conducted at a location reasonably convenient to the franchisee4 7#g7 ,to terminate1 cancel1 or fail to renew a franchise for the failure or refusal of the franchisee to do any of the following3 7,a7 ,refusal to take part in any promotional campaign which is not reasonable1 implemented in good faith1 and expected to promote the profitability of the franchisee's business4 7,b7 ,failure to meet sales quotas suggested or required by the franchisor not expressly set forth in the franchise agreement4 7,c7 ,failure or refusal to sell any products or services at a price suggested or required by the franchisor1 an affiliate of the franchisor1 or any supplier approved by the franchisor4 7,d7 ,refusal to keep the franchised premises open and operating during hours which are unprofitable to the franchisee or to preclude the franchisee from establishing its own hours of operation or nonoperation for the period between the hours of #aj p4m4 and #f a4m41 unless said business is commonly recognized as an extended hour business or the initial signed franchise agreement required operating during these hours4 7,e7 ,refusal to give the franchisor or any supplier financial records of the operation of the franchise which are not related or unnecessary to the performance of franchisee's express obligations under the franchise agreement or records unrelated to the franchise business4 7#h7 ,to restrict a franchisee from associating with other franchisees or from joining1 leading1 or otherwise participating in a trade or other association1 or retaliate against a franchisee for engaging in these activities4 7#i7 ,to require or prohibit any change in management of any franchise unless the requirement or prohibition of the change shall be for good cause1 which cause shall be stated in writing by the franchisor and be based on violations of material1 reasonable and reasonably required express provisions of the franchise agreement4 ,good cause shall include requiring that management of the franchise be conducted by-- 7,a7 personnel who have been trained in the manner required of all franchise managers in the system2 and 7,b7 personnel who are legally eligible for employment in the ,united ,states of ,america4 7#aj7 ,to impose on a franchisee by contract1 rule1 or regulation1 whether written or oral1 a standard of conduct or performance unless the franchisor1 its agents or representatives1 sustain the burden of proving the standard to be reasonable1 necessary1 and uniformly enforced and applied throughout its system of franchisees1 franchisor-owned units and licensees4 ,the following are examples of unreasonable conduct3 7,a7 ,to fail to deal fairly and in good faith or fail to exercise due care with a franchisee or any association or other aggregation or incorporation of franchisees in all business matters1 including-- 7i7 proposed and actual transfer of the franchise2 7ii7 administration of advertising funds1 rewards programs1 and marketing funds2 and 7iii7 the interpretation1 administration1 and performance of franchise agreements and area development or territory agreements4 7,b7 ,to sell1 rent1 or offer to sell to a franchisee or require a franchisee to buy any product or service for more than a fair and reasonable price or without the reasonable expectation that the sale or rental transaction itself will be profitable for the franchisee's business4 7,c7 ,to discriminate between franchisees in the charges offered or made for royalties1 goods1 services1 equipment1 rentals1 advertising services1 or in any other business dealing1 unless that discrimination between franchisees-- 7i7 would be necessary to allow a particular franchisee to fairly meet competition in the open market2 7ii7 does not adversely affect the business of any existing franchisee2 and 7iii7 to the extent that the franchisor satisfies the burden of proving that any classification of or discrimination between franchisees is reasonable1 the discrimination is based on franchises granted at materially different times and the discrimination is reasonably related to the difference in time or on other proper and justifiable distinctions1 and is not arbitrary or intended to be for the benefit of the franchisor at the expense of any franchisee4 ,nothing in this subsection shall be construed as granting to a franchisor any right which may be limited by any other ,state or ,federal statute4 7,d7 ,to notify the franchisee of a claimed breach of the franchise agreement no later than #ahj days from the date the breach arises or #ahj days after the franchisor knew or in the exercise of reasonable care should have known of the claimed breach4 7,e7 ,to require a franchisee to keep the franchised premises open and operating during hours which are unprofitable to the franchisee or to preclude the franchisee from establishing its own hours of operation or nonoperation between the hours of #aj p4m4 and #f a4m41 unless said business is commonly recognized as an extended hour business1 or the initial signed franchise agreement required operating during these hours4 7,f7 ,to require a franchisee to include noncompete language in employment contracts with its employees4 7,g7 ,to fail to1 without charge1 make readily available to franchisees1 and provide a physical copy of true1 accurate1 and complete copies of all records and accountings of marketing1 rewards programs1 advertising funds1 and fees that have been paid by franchisees1 vendors1 suppliers1 and licensees4 7,h7 ,to impose performance standards on franchises unless the franchisor proves the performance standards are reasonable1 necessary1 and uniformly enforced4 7,i7 ,to require or request a franchisee to assent to a release1 assignment1 novation1 waiver1 or estoppel which would prospectively relieve any person from liability imposed by this chapter4 7,j7 ,to require or demand that a franchisee pay liquidated or other post-termination damages in excess of the average monthly royalty fees paid by the franchisee during the prior #ab full calendar months 7or the shorter time that the franchised location has been in the system71 multiplied by the lesser of #f months or the number of months remaining in the term of the franchise agreement4 7,k7 ,to act to accomplish1 either directly or indirectly through any parent company1 subsidiary1 affiliate1 or agent1 what would otherwise be prohibited under this chapter on the part of the manufacturer or distributor4 #d4 ,standards of conduct 7a7 ,duty of good faith 7#a7 ,a franchise contract imposes on each party thereto a duty to act in good faith in its performance and enforcement4 7#b7 ,as used in this subsection1 a duty of good faith shall-- 7,a7 obligate a party to a franchise to do nothing that will have the effect of destroying or injuring the right of the other party to obtain and receive the expected fruits of the contract2 7,b7 obligate a party to do everything required under the contract to accomplish the purposes of the contract2 and 7,c7 require honesty in fact and observance of reasonable standards of fair dealing in the trade4 7#c7 ,no provision of any franchise agreement1 express or implied1 shall be interpreted or enforced in such a way as to obfuscate or avoid a party's duty to act reasonably and in good faith with the other1 or otherwise allow a disparate result in the franchise relationship4 7b7 ,duty of due care 7#a7 ,a franchise agreement imposes on the franchisor a duty of due care4 ,unless a franchisor represents that it has greater skill or knowledge in its undertaking with its franchisees1 or conspicuously disclaims that it has any skill or knowledge1 the franchisor is required to exercise the skill and knowledge normally possessed by franchisors in good standing in the same or similar types of business4 7#b7 ,for purposes of this subsection-- 7,a7 the term skill or knowledge means something more than the mere minimum level of skill or knowledge required of any person engaging in a service or business and involves a special level of expertise-- 7i7 which is the result of acquired learning and aptitude developed by special training and experience in the business to be licensed under the franchise agreement1 or the result of extensive use and experience with the goods or services or the operating system of such business2 7ii7 which is the result of experience in organizing a franchise system and in providing training1 assistance and services to franchisees2 and 7iii7 which a prospective franchisee would expect in reasonable reliance on the written and oral commitments and representations of the franchisor2 and 7,b7 a franchisor shall be permitted to show that it contracted for1 hired1 or purchased the expertise necessary to comply with the requirements of this subsection and that such expertise was incorporated in the franchise or communicated or provided to the franchisee4 7#c7 ,the requirement of this subsection may not be waived by agreement or by conduct1 but the franchisor may limit in writing the nature and scope of its skill and knowledge1 and of its undertaking with a prospective franchisee1 by stating that it claims no skill or knowledge in a particular area1 provided that no inconsistent representation1 whether written or oral1 is made to the prospective franchisee irrespective of any merger or integration clause in the franchise agreement4 #e4 ,procedural fairness 7a7 ,in general ,it shall be unlawful for any franchisor1 either directly or indirectly through another person1 to-- 7#a7 require any term or condition in a franchise agreement1 or in any agreement ancillary or collateral to a franchise1 which directly or indirectly violates any provision of this ,act2 7#b7 require a franchisee to assent to any disclaimer1 waiver1 release1 stipulation1 or other provision which would purport-- 7,a7 to relieve any person from a duty imposed by this ,act1 except as part of a settlement of a preexisting bona fide dispute2 or 7,b7 to protect any person against any liability to which he would otherwise be subject under this ,act by reason of willful misfeasance1 bad faith1 or gross negligence in the performance of duties1 or by reason of reckless disregard of obligations and duties under the franchise agreement2 or 7#c7 require a franchisee to assent to any waiver1 release1 stipulation1 or other provision1 either as part of any agreement or document relating to the operation of a franchise business1 in any agreement or document relating to the termination1 cancellation1 forfeiture1 repurchase1 or resale of a franchise business1 or as a condition for permitting a franchisee to leave the franchise system1 which would purport to prevent the franchisee from making any oral or written statement relating to the franchise business1 to the operation of the franchise system1 or to the franchisee's experience with the franchise business4 7b7 ,terms of agreement ,any condition1 stipulation1 provision1 or term of any franchise agreement1 or any agreement ancillary or collateral to a franchise1 which would purport to waive or restrict any right granted under this ,act shall be void and unenforceable4 ,no stipulation or provision of a franchise agreement1 or of an agreement ancillary or collateral to a franchise1 shall-- 7#a7 deprive a franchisee of the application and benefits of this ,act1 of any other ,federal law1 or of the law of any ,state in which the franchisee is a resident1 or in which the franchisee's place of business is located2 7#b7 deprive a franchisee of the right to commence an action against the franchisor for violation of this ,act1 or for breach of the franchise agreement1 or of any agreement or stipulation ancillary or collateral to the franchise1 in a court in the ,state of the franchisee's principal place of business2 or 7#c7 prevent a franchisee from bringing or participating in any of the following actions3 7,a7 ,a consolidated action or consolidated arbitration4 7,b7 ,a mass action or mass arbitration4 7,c7 ,a class action under ,rule #bc of the ,federal ,rules of ,civil ,procedure4 7,d7 ,a class arbitration as authorized by the ,american ,arbitration ,association ,supplementary ,rules for ,class ,arbitrations4 7,e7 ,a similar consolidated1 mass1 or class proceeding permissible under ,state or ,federal statutory or common law1 or under the rules of any other arbitration association4 7c7 ,no waivers ,compliance with this ,act or with an applicable ,state franchise law is not waived1 excused1 or avoided1 and evidence of violation of this ,act or of such ,state law shall not be excluded1 by virtue of an integration clause1 any choice-of-law1 choice-of-venue or any other provision of a franchise agreement1 or an agreement ancillary or collateral to a franchise1 the parol evidence rule1 or any other rule of evidence purporting to exclude consideration of matters outside the franchise agreement4 #f4 ,transfer of a franchise 7a7 ,transfer of interest ,a franchisee may assign an interest in a franchised business or in a franchise to a transferee provided the transferee satisfies the reasonable qualifications then generally applied by the franchisor in the offer and sale of franchises4 ,for the purpose of this section1 a reasonable current qualification for a new franchisee is a qualification based upon a legitimate business reason4 ,if the proposed transferee does not meet the reasonable current qualifications of the franchisor1 the franchisor may refuse to permit the transfer1 provided that the refusal of the franchisor to consent to the transfer is not arbitrary or capricious and the franchisor states the grounds for its refusal in writing to the franchisee4 7b7 ,notice ,a franchisee shall give a franchisor not less than #fj days written notice of a proposed transfer of a transferable interest1 and on request shall provide in writing the ownership interests of all persons holding or claiming an equitable or beneficial interest in the franchise subsequent to the transfer or the franchisee1 as appropriate4 7c7 ,consent implied ,a transfer by a franchisee is considered to have been approved #fj days after the franchisee submits the request for permission to transfer the franchise involved unless1 within that time the franchisor refuses to consent to the transfer as evidenced in writing in accordance with subsection 7a74 7d7 ,conditions ,a franchisor may require as a condition of a transfer that-- 7#a7 the transferee successfully complete a reasonable training program2 7#b7 a reasonable transfer fee be paid to reimburse the franchisor for the franchisor's reasonable and actual expenses directly attributable to the transfer2 7#c7 the transferring franchisee pay or make reasonable provision to pay any amount due the franchisor or the franchisor's affiliate2 or 7#d7 the financial terms of the transfer at the time of the transfer1 comply with the franchisor's current financial requirements for franchisees4 7e7 ,prohibited conditions ,a franchisor may not condition its consent to a transfer described in subsection 7a7 on-- 7#a7 franchisee's forgoing existing rights other than those contained in the franchise agreement2 7#b7 a franchisee's entering into a release of claims broader in scope than a counterpart release of claims offered by the franchisor to the franchisee2 or 7#c7 requiring the franchisee or transferee to make1 or agree to make1 capital improvements1 reinvestments1 or purchases in an amount greater than the franchisor could have reasonably required under the terms of the franchisee's existing franchise agreement4 7f7 ,no additional agreement required after transfer ,a franchisee may assign the franchisee's interest in the franchise for the unexpired term of the franchise agreement1 and a franchisor shall not require the franchisee or the transferee to enter into a franchise agreement that has different material terms or financial requirements as a condition of the transfer4 7g7 ,public offerings ,a franchisor may not withhold its consent to a franchisee's making a public offering of its securities without good cause if the franchisee1 or the owner of the franchisee's interest in the franchise1 retains control over more than #be percent of the voting power as the franchisee4 7h7 ,other consolidation ,a franchisor may not withhold its consent to a pooling of interests1 to a sale or exchange of assets or securities1 or to any other business consolidation amongst its existing franchisees1 provided the constituents are each in material compliance with their respective obligations to the franchisor4 7i7 ,occurrences not considered transfers ,the following occurrences shall not be considered transfers requiring the consent of the franchisor under a franchise agreement1 and a franchisor shall not impose any fees1 payments1 or charges in excess of a franchisor's cost to review the relevant matter3 7#a7 ,the succession of ownership or management of a franchise upon the death or disability of a franchisee1 or of an owner of a franchise1 to the surviving spouse1 heir1 or partner active in the management of the franchise unless the successor objectively fails to meet within #a year the then current reasonable qualifications of the franchisor for franchisees4 7#b7 ,incorporation of a proprietorship franchisee1 provided that the franchisor may require a personal guarantee by the franchisee of obligations related to the franchise4 7#c7 ,a transfer within an existing ownership group of a franchise provided that more than #ej percent of the franchise is held by persons who meet the franchisor's reasonable current qualifications for franchisees4 ,if less than #ej percent of the franchise would be owned by persons who objectively meet the franchisor's reasonable current qualifications1 the franchisor may refuse to authorize the transfer4 7#d7 ,a transfer of less than a controlling interest in the franchise to the franchisee's spouse or child or children1 provided that more than #ej percent of the entire franchise is held by those who meet the franchisor's reasonable current qualifications4 ,if less than #ej percent of the franchise would be owned by persons who objectively meet the franchisor's reasonable current qualifications1 the franchisor may refuse to authorize the transfer4 7#e7 ,a grant or retention of a security interest in the franchised business or its assets1 or an ownership interest in the franchisee1 if the security agreement establishes an obligation on the part of the secured party enforceable by the franchisor to give the franchisor1 simultaneously with notice to the franchisee1 notice of the secured party's intent to foreclose on the collateral1 and a reasonable opportunity to redeem the interest of the secured party and recover the secured party's interest in the franchise or franchised business by satisfying the secured obligation4 7#f7 ,a franchisor may not exercise any purported right of first refusal or right to purchase with regard to any franchise1 or interest or assets of a franchisee1 upon the happening of any event described in paragraphs 7#a7 through 7#e74 7j7 ,certain covenants unenforceable ,after the transfer of a transferor's complete interest in a franchise1 a franchisor may not enforce against the transferor any covenant of the franchise agreement purporting to prohibit the transferor from engaging in any lawful occupation or enterprise4 ,this subsection shall not limit the franchisor from enforcing a contractual covenant against the transferor not to exploit the franchisor's trade secrets or intellectual property rights 7including protection of trade dress7 except by agreement with the franchisor4 #g4 ,renewal of the franchise2 notice 7a7 ,in general ,a franchisor shall not1 directly or through an officer1 agent1 or employee1 fail to renew a franchise1 except for good cause shown4 7b7 ,fees ,renewals shall not be subject to unreasonable fees4 ,fees shall not be deemed unreasonable if they do not exceed #ej percent of the amount of the average initial franchise fee or other required payments then being charged to all franchisees4 7c7 ,good cause for nonrenewal ,good cause as described in subsection 7a7 shall be based upon legitimate business reason which shall include1 the franchisee's refusal or failure to substantially comply with any material1 reasonable and reasonably necessary express obligation of the franchise agreement within the #a-year period prior to renewal1 including repeated and intentional nonpayment of royalties1 advertising or marketing fees clearly required by the franchise agreement4 7d7 ,notice of nonrenewal ,before nonrenewal of the franchise1 the franchisor shall give the franchisee written notice at least #ij days in advance of the nonrenewal4 ,the notice shall state all of the reasons constituting good cause for the nonrenewal and shall provide that the franchisee has #fj days in which to rectify any claimed discrepancy and reinstate its right to renew the franchise4 7e7 ,preservation of fees ,if the franchisor requires the franchisee to sign a new franchise agreement as a condition of renewal1 such franchise agreement shall contain the same royalties1 advertising fees1 and other fees as the expiring agreement1 no new fees and any protected territory in the expiring agreement shall be the same in the renewal franchise4 7f7 ,prohibited actions ,a franchisor shall not prohibit1 or enforce a prohibition against1 any franchisee from-- 7#a7 engaging in any business at any location after expiration of a franchise agreement2 or 7#b7 using the customer list and telephone numbers associated with the franchise business4 7g7 ,rule of construction ,nothing in this subsection shall be interpreted to prohibit enforcement of any provision of a franchise contract obligating a franchisee after expiration or termination of a franchise-- 7#a7 to cease or refrain from using a trademark1 other trade secret1 or other intellectual property owned by the franchisor or its affiliate2 7#b7 to alter the appearance of the business premises so that it is not substantially similar to the standard design1 decor criteria1 trade dress or motif in use by other franchisees using the same name or trademarks within the proximate trade or market area of the business2 or 7#c7 to modify the manner or mode of business operations so as to avoid any substantial confusion with the manner or mode of operations which are unique to the franchisor and commonly in practice by other franchisees using the same name or trademarks within the proximate trade or market area of the business4 #h4 ,termination2 good cause2 notice2 opportunity to cure 7a7 ,in general ,a franchisor shall not1 directly or through an officer1 agent1 or employee1 terminate or cancel a franchise1 or substantially change the competitive circumstances of the franchisee1 except for good cause shown4 7b7 ,default provisions ,a default under one franchise agreement shall not in and of itself constitute a default under another franchise agreement to which the franchisee or an affiliate of the franchisee is a party4 ,any cross-default provisions are null and void4 7c7 ,notice ,prior to termination or cancellation of the franchise1 the franchisor shall give the franchisee written notice at least #ij days in advance of the termination4 ,the notice shall state all of the reasons constituting good cause for termination or cancellation and shall provide that the franchisee has #fj days in which to rectify any claimed defaults4 7d7 ,exception to notice requirement ,the requirement for #ij days advance written notice for termination shall not apply if the reason for termination is because-- 7#a7 the alleged grounds are voluntary abandonment by the franchisee of the franchise relationship1 in which event1 such notice may be given #ae days in advance of the termination or cancellation2 or 7#b7 the conviction of the franchisee in a court of competent jurisdiction of an offense1 where the conviction is no longer appealable and the offense is-- 7,a7 punishable by a term of imprisonment in excess of #a year2 7,b7 directly related to the business conduct pursuant to the franchise2 or 7,c7 materially impairs the goodwill value of the franchise or the franchised trademark4 ,in that event1 such notice may be given at any time following the date on which the conviction is no longer appealable and shall be effective upon delivery and written receipt of the notice4 ,in no event shall any franchisor collect any financial penalty or fee1 however delineated1 as a consequence of such conviction4 7e7 ,additional notice ,if the reason for termination or cancellation is nonpayment of sums due under the franchise agreement1 the franchisee shall be entitled to written notice of such default1 and shall have #ae days in which to cure such default from the date of such notice4 ,for such nonpayment defaults a franchisee has the right to cure #c times in any #ab-month period during the period of the franchise agreement4 7f7 ,notice of imminent danger ,if the reason for termination or cancellation is violation of any law or regulation relating to an imminent danger to public health or safety the franchisee shall be entitled to immediate written notice and shall have #bd hours following receipt of such notice to cure such violation4 7g7 ,good cause ,a franchisee may terminate a franchise agreement for good cause shown1 without any further liability to the franchisor4 ,good cause shall include changes to the franchise system or the competitive circumstances of the franchise business1 which would cause substantial negative impact or substantial financial hardship to the franchisee in the operation of its franchise4 #i4 ,effect of termination 7a7 ,in general ,upon termination of a franchise for whatever cause or reason1 except voluntary relinquishment or abandonment of the franchise by the franchisee or the expiration of the franchise agreement where the franchisee does not elect to renew1 the franchisor shall fairly compensate the franchisee or franchisee's estate for the fair market value at the time of termination of the franchise1 of the franchisee's inventory1 supplies1 equipment1 and furnishings purchased by the franchisee from the franchisor or its approved sources and the fair market value of the going concern value and good will of the business1 if any1 exclusive of personalized items which have no value to the franchisor and inventory1 supplies1 equipment1 and furnishings not reasonably required in the conduct of the franchise business2 provided1 however1 that-- 7#a7 compensation need not be made to franchisee of going concern value and good will if the franchisor agrees in writing not to enforce a covenant which restrains the franchisee from competing with the franchisor in the same or substantially similar business in the same or substantially similar manner at the same location using the same property except the franchisor's registered trademark or trade name2 and 7#b7 a franchisor may offset against amounts owed to a franchisee under this subsection any amount mutual agreed upon and owed by the franchisee to franchisor which is not the subject of a good faith dispute by the franchisee4 7b7 ,rule of construction ,the provisions of this section shall not be construed to permit the termination or nonrenewal of any franchise agreement except in accordance with the express terms of the franchise agreement and this ,act4 #aj4 ,transfer of franchise by franchisor ,a franchisor shall not transfer1 by sale or otherwise1 its interest in a franchise system unless-- 7#a7 the franchisor provides1 not less than #cj days before the effective date of transfer1 notice to every franchisee of the intent to transfer the franchisor's interest in the franchise or of substantially all of the franchises held by the franchisor2 7#b7 such notice is accompanied by a complete description of the business and financial terms of the proposed transfer or transfers2 and 7#c7 upon the transfer1 the entity assuming the franchisor's obligations has the business experience and financial means to adequately perform all of the franchisor's obligations in the ordinary course of business4 #aa4 ,private right of action 7a7 ,in general ,a franchisee who is injured by a violation or threatened violation of this ,act1 or of section #dcf4a of title #af1 ,code of ,federal ,regulations 7relating to disclosure requirements and prohibitions concerning franchising and business opportunity ventures71 as in effect on the date of the enactment of this ,act1 may bring a private right of action in any court of appropriate jurisdiction for rescission and restitution1 as well as for all damages and maybe awarded injunctive relief against a violation or threatened violation of this ,act or such section4 ,the franchisee shall also be entitled to recover its costs of litigation and reasonable attorney's fees and expert witness fees1 against any entity or person found to be liable for such violation4 7b7 ,liability ,every person who directly or indirectly controls a person liable under subsection 7a71 every partner in a firm so liable1 every principal executive officer or director of a corporation so liable1 every person occupying a similar status or performing similar functions and every employee of a person so liable who materially aids in the act or transaction constituting the violation is also liable jointly and severally with and to the same extent as such person1 unless the person who would otherwise be liable hereunder had no knowledge of or reasonable grounds to know of the existence of the facts by reason of which the liability is alleged to exist4 7c7 ,statute of limitations ,no action may be commenced pursuant to this section or this ,act more than the later of-- 7#a7 #e years after the date on which the violation occurs2 or 7#b7 #c years after the date on which the violation is discovered or should have been discovered through exercise of reasonable diligence4 7d7 ,venue ,a franchisee may commence a civil action to enforce any provision of this ,act within the jurisdiction wherein the applicable franchisee is a resident or where the applicable business is located4 7e7 ,cumulative right ,the private rights provided for in this section are in addition to and not in lieu of other rights or remedies created by ,federal or ,state law4 #ab4 ,scope and applicability 7a7 ,prospective application ,except as provided in subsection 7b71 the requirements of this ,act shall apply to franchise agreements entered into1 amended1 exchanged1 transferred1 assigned1 or renewed after the date of enactment of this ,act4 7b7 ,delayed effect ,the requirements of section #c of this ,act shall take effect #ij days after the date of enactment of this ,act and shall apply only to actions1 practices1 disclosures1 and statements occurring on or after such date4 #ac4 ,definitions ,for purposes of this ,act1 the following definitions apply3 7#a7 ,the term affiliate has the meaning given the term affiliated person in section #dcf4a7;b7 of title #af of the ,code of ,federal ,regulations as in effect on ,july #a1 #bjjg4 7#b7 ,the term disclosure document means either the disclosure statement required by the ,federal ,trade ,commission in ,trade ,regulation ,rule #dcf 7#af ,c4,f4,r4 #dcf7 as amended from time to time1 or any offering format allowed or required by ,state or local law4 7#c7 ,the term franchise has the meaning given such term in section #dcf4a7;h7 of title #af of the ,code of ,federal ,regulations as in effect on ,july #a1 #bjjg1 but does not include any contract otherwise regulated by the ,federal ,petroleum ,marketing ,practices ,act 7#ae ,u4,s4,c4 #bhja et seq47 except as to franchise relationships that do not involve the sale of petroleum products4 7#d7 ,the term franchise seller has the meaning given such term in section #dcf4a7;j7 of title #af of the ,code of ,federal ,regulations as in effect on ,july #a1 #bjjg4 7#e7 ,the term franchisee has the meaning given such term in section #dcf4a7;i7 of title #af of the ,code of ,federal ,regulations as in effect on ,july #a1 #bjjg4 7#f7 ,the term franchisor has the meaning given such term in section #dcf4a7k7 of title #af of the ,code of ,federal ,regulations as in effect on ,july #a1 #bjjg4 7#g7 ,the terms material and material fact include-- 7,a7 any fact1 circumstance1 or set of conditions which a reasonable franchisee or a reasonable prospective franchisee would consider important in making a significant decision relating to entering into1 remaining in1 or abandoning a franchise relationship2 and 7,b7 any fact1 circumstance1 or set of conditions which has1 or may have1 any significant financial impact on a franchisor1 franchisee1 or a prospective franchisee4 7#h7 ,the term offer or offering means any effort to offer or to dispose of1 or solicitation of an offer to buy1 a franchise or interest in a franchise for value4 7#i7 ,the term outlet means a point of sale1 temporary or permanent1 fixed or mobile1 from which goods or services are offered for sale4 7#aj7 ,the term person means either an individual or any other legal or commercial entity4 7#aa7 ,the term ,state means a ,state1 the ,district of ,columbia1 and any territory or possession of the ,united ,states4 7#ab7 ,the term subfranchise means a contract or an agreement by which a person pays a franchisor for the right to sell1 negotiate the sale1 or provide service franchises4 7#ac7 ,the term subfranchisor means a person who is granted a subfranchise4 7#ad7 ,the term trade secret means information1 including a formula1 pattern1 compilation1 program1 device1 method1 technique1 or process1 that-- 7,a7 derives independent economic value1 actual or potential1 from not being generally known to1 and not being readily ascertainable by proper means by1 other persons who can obtain economic value from its disclosure or use2 and 7,b7 is the subject of efforts that are reasonable under the circumstances to maintain its secrecy4 7#ae7 ,the terms nonrenewal and nonrenew mean that the franchisor fails or refuses to extend the franchisor-franchisee relationship at the end of the existing term of the franchise agreement1 irrespective of whether the franchise agreement contains any contractual right to obtain a renewal term4 ,allowing a franchise agreement with no renewal term to expire shall be considered to be a nonrenewal for purposes of this ,act4 #ad4 ,severability ,if any provision or clause of this section or any application of this section to any person or circumstances is held invalid1 such invalidity shall not affect other provisions or applications of the section which can be given effect without the invalid provision or application1 and to this end the provisions of this section are declared to be severable4 #ae4 ,state attorneys general 7a7 ,civil action ,whenever an attorney general 7or similar enforcement officer of a ,state1 however denominated1 hereinafter attorney general7 of any ,state has reason to believe that the interests of the residents of that ,state have been or are being threatened or adversely affected because any person has engaged or is engaging in a pattern or practice which violates any provision of this ,act1 the ,state1 as parens patriae1 may bring a civil action on behalf of its residents in an appropriate ,state court or district court of the ,united ,states to enjoin such violations1 to obtain damages1 restitution or other compensation on behalf of residents of such ,state or to obtain such further and other relief as the court may deem appropriate4 7b7 ,preservation of power ,for purposes of bringing any civil action under subsection 7a71 nothing in this ,act shall prevent an attorney general from exercising the powers conferred on the attorney general by the laws of such ,state to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence4 7c7 ,venue ,any civil action brought under subsection 7a7 in a district court of the ,united ,states may be brought in the district in which the defendant is found1 is an inhabitant1 or transacts business1 or wherever venue is proper under section #acia of title #bh1 ,united ,states ,code4 ,process in such action may be served in any district in which the defendant is an inhabitant or in which the defendant may be found4 7d7 ,no preemption ,nothing contained in this section shall prohibit an authorized ,state official from proceeding in ,state court on the basis of an alleged violation of any civil or criminal statute of such ,state4