§482E-6  Relationship between franchisor or
subfranchisor and franchisee.  Without limiting the other provisions of
this chapter, the following specific rights and prohibitions shall govern the
relation between the franchisor or subfranchisor and its franchisees:



(1)  The parties shall deal with each other in good
faith.



(2)  For the purposes of this chapter and without
limiting its general application, it shall be an unfair or deceptive act or
practice or an unfair method of competition for a franchisor or subfranchisor
to:



(A)  Restrict the right of the franchisees to
join an association of franchisees.



(B)  Require a franchisee to purchase or lease
goods or services of the franchisor or from designated sources of supply unless
such restrictive purchasing agreements are reasonably necessary for a lawful
purpose justified on business grounds.  Suppliers suggested or approved by a
franchisor as meeting its standards and requirements shall not be deemed
designated sources of supply.



(C)  Discriminate between franchisees in the
charges offered or made for royalties, goods, services, equipment, rentals,
advertising services, or in any other business dealing, unless and to the
extent that any classification of or discrimination between franchisees is:



(i)  Based on franchises granted at materially
different times, and such discrimination is reasonably related to such
differences in time;



(ii)  Is related to one or more programs for
making franchises available to persons with insufficient capital, training, business
experience, education or lacking other qualifications;



(iii)  Is related to local or regional
experimentation with or variations in product or service lines or business
formats or designs;



(iv)  Is related to efforts by one or more
franchisees to cure deficiencies in the operation of franchise businesses or
defaults in franchise agreements; or



(v)  Is based on other reasonable distinctions
considering the purposes of this chapter and is not arbitrary.



(D)  Obtain money, goods, services, anything of
value, or any other benefit from any other person with whom the franchisee does
business on account of such business unless the franchisor advises the
franchisee in advance of the franchisor's intention to receive such benefit.



(E)  Establish a similar business or to grant a
franchise for the establishment of a similar business at a location within a
geographical area specifically designated as the exclusive territory in a
franchise previously granted to another franchisee in a currently effective agreement,
except under the circumstances or conditions prescribed in such agreement.  The
fact that other franchisees or the franchisor may solicit business or sell
goods or services to people residing in such geographical territory shall not
constitute the establishment of a similar business within the exclusive
territory.



(F)  Require a franchisee at the time of
entering into a franchise to assent to a release, assignment, novation, or
waiver which would relieve any person from liability imposed by this chapter. 
Any condition, stipulation or provision binding any person acquiring any
franchise to waive compliance with any provision of this chapter or a rule
promulgated hereunder shall be void.  This paragraph shall not bar or affect
the settlement of disputes, claims or civil suits arising or brought under this
chapter.



(G)  Impose on a franchisee by contract, rule,
or regulation, whether written or oral, any unreasonable and arbitrary standard
of conduct.



(H)  Terminate or refuse to renew a franchise except
for good cause, or in accordance with the current terms and standards
established by the franchisor then equally applicable to all franchisees,
unless and to the extent that the franchisor satisfies the burden of proving
that any classification of or discrimination between franchisees is reasonable,
is based on proper and justifiable distinctions considering the purposes of
this chapter, and is not arbitrary.  For purposes of this paragraph, good cause
in a termination case shall include, but not be limited to, the failure of the
franchisee to comply with any lawful, material provision of the franchise
agreement after having been given written notice thereof and an opportunity to
cure the failure within a reasonable period of time.



(I)  Refuse to permit a transfer of ownership
of a franchise, or of a proprietorship, partnership, corporation or other
business entity that is a franchisee or subfranchisor, except for good cause. 
For purposes of this paragraph good cause shall include, but not be limited to:



(i)  The failure of a proposed transferee to
meet any of the franchisor's or subfranchisor's reasonable qualifications or
standards then in effect for a franchisee or subfranchisor;



(ii)  The fact that the proposed transferee or
any affiliated person of the proposed transferee is a competitor of the
franchisor or subfranchisor;



(iii)  The inability or unwillingness of the
proposed transferee to agree in writing to comply with and be bound by all
lawful obligations imposed by the franchise, including without limitation all
instruction and training obligations, and to sign the current form of franchise
agreement used by the franchisor or subfranchisor; and



(iv)  The failure of the franchisee or proposed
transferee to pay any sums owing to the franchisor and to cure any default in
the franchise agreement or other agreements with the franchisor existing at the
time of the proposed transfer.



A franchisor or subfranchisor shall
have thirty days after being notified in writing of a proposed transfer to
approve or disapprove in writing a proposed transfer of ownership or control of
a franchise, or of a proprietorship, partnership, corporation or other business
entity that is a franchisee or subfranchisor, stating its reason for
disapproval.  If a franchisor or subfranchisor fails to approve or disapprove a
proposed transfer in writing within such period, the franchisor or
subfranchisor shall be deemed to have approved such transfer.



(3)  Upon termination or refusal to renew the
franchise the franchisee shall be compensated for the fair market value, at the
time of the termination or expiration of the franchise, of the franchisee's
inventory, supplies, equipment and furnishings purchased from the franchisor or
a supplier designated by the franchisor; provided that personalized materials
which have no value to the franchisor need not be compensated for.  If the
franchisor refuses to renew a franchise for the purpose of converting the
franchisee's business to one owned and operated by the franchisor, the franchisor,
in addition to the remedies provided in this paragraph, shall compensate the
franchisee for the loss of goodwill.  The franchisor may deduct from such
compensation reasonable costs incurred in removing, transporting and disposing
of the franchisee's inventory, supplies, equipment, and furnishings pursuant to
this requirement, and may offset from such compensation any moneys due the
franchisor.



(4)  The provisions of this chapter shall apply to all
written or oral arrangements with the franchisee including but not limited to
the franchise offering, the franchise agreement, sales of goods or services,
leases and mortgages of real or personal property, promises to pay, security
interest, pledges, insurance contracts, advertising contracts, construction or
installation contracts, servicing contracts, and all other such arrangements in
which the franchisor or subfranchisor has any direct or indirect interest.



(5)  In any proceedings damages may be based on
reasonable approximations but not on speculation. [L 1974, c 18, pt of §1; am L
1978, c 242, §7]



 



Case Notes



 



  Court read allegations as to discrimination as falling within
paragraph (2)(C)'s definition of unfair methods of competition; therefore,
plaintiffs stated a claim for unfair competition.  895 F. Supp. 1365.