The first half of 2017 brought the United States a new presidential administration and a number of changes to state franchising regulations. While Florida has rejected new franchise legislation, multiple states are amending existing franchising laws, including Illinois, Georgia and Indiana.(1)
Florida Senate rejects proposed franchise legislation
In May 2017 the Florida Senate rejected the proposed Protect Florida Small Business Act. When introduced to the Florida Senate in March 2017,(2) the act's stated purposes included promoting fair business relations between franchisees and franchisors, and protecting franchisees against unfair treatment.
Some of the act's proposed provisions would have:
- limited circumstances in which a franchisor could terminate a franchisee without an opportunity to cure;
- restricted a franchisor's ability to deny a franchisee a renewal;
- prevented franchisors from denying the sale or transfer of a franchise to a qualified purchaser; and
- required franchisors to repurchase the franchisee's operational assets at a fair market value (eg, inventory, equipment, fixtures and furniture).
Before its rejection, the act had received substantial criticism in the franchise industry for being overreaching legislation that would limit franchising in Florida.
Illinois considers repealing and amending franchise laws
In February 2017 Illinois introduced legislation that would repeal most substantive portions of the Illinois Franchise Disclosure Act.(3) The proposal would repeal substantive portions of the act except for:
- savings provisions;
- provisions relating to findings and purposes; and
- provisions imposing fees.
The proposal would also add a legislative declaration asserting that the "enforceability of federal franchise guidelines in Illinois is an essential element in the protection of the franchisor and franchisee relationship in Illinois".(4) Since March 2017, the proposal has been pending for consideration by the Illinois Rules Committee, which could advance the proposal to the Illinois House of Representatives.
The Illinois legislature also introduced amendments to the Motor Vehicle Franchise Act.(5) Under the amendments, manufacturers are prohibited from requiring dealers to remodel facilities for 10 years following the last upgrade. Some additional highlights of the amendments include new provisions that:
- restrict a manufacturer's right to rescind sales incentives paid to a dealer if a customer exports to another country;
- prohibit a manufacturer from restricting the vendors for which a dealer can use for improvements; and
- provide guidelines on a manufacturer's right of first refusal.
In May 2017, the amendments became immediately effective as Illinois law.(6)
Georgia and Indiana's new motor vehicle franchise laws
Georgia has approved amendments to its motor vehicle franchise laws to become effective on July 1 2017.(7) The amendments provide a legal standard for reasonable compensation for a franchisor, manufacturer, distributor or third party to collect compensation for parts and labour for warranty services performed by a dealer. In addition, the amendments modify a franchisor's right of first refusal to acquire assets of a dealer in the event of proposed changes of ownership or transfer of assets.
Indiana has enacted a law covering automobile sales requirements which will become effective on July 1 2017.(8) The new law provides that a manufacturer may engage in direct sales to the public only if the manufacturer was granted its initial licence to sell new motor vehicles before July 1 2015 and has established a warranty repair centre in Indiana before January 1 2018. The law also prohibits manufacturers from selling directly to the public if the manufacturer sells, conveys or transfers a majority interest to another person that is required to be registered under Indiana law.
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