Florida Senate - 2018                                    SB 1076
       By Senator Steube
       16-00774-18                                           20181076__
    1                        A bill to be entitled                      
    2         An act relating to franchises; creating s. 686.101,
    3         F.S.; providing a short title; creating s. 686.102,
    4         F.S.; providing legislative findings and intent;
    5         providing construction; creating s. 686.103, F.S.;
    6         defining terms; creating s. 686.104, F.S.; prohibiting
    7         a franchisor from terminating or not renewing a
    8         franchise under certain circumstances; providing
    9         limitations on what constitutes good cause;
   10         authorizing the franchisor to give immediate notice of
   11         termination of a franchise for specified reasons under
   12         certain circumstances; creating s. 686.105, F.S.;
   13         prohibiting a franchisor from denying certain persons
   14         the opportunity to participate in the ownership of a
   15         franchise for a specified period after the death of
   16         the franchisee or the death of a person controlling a
   17         majority interest in the franchise; requiring
   18         specified persons to meet certain requirements or to
   19         sell, transfer, or assign the franchise after the
   20         death of the franchisee or the death of the person
   21         controlling a majority interest in the franchise;
   22         authorizing a franchisee to sell, transfer, or assign
   23         a franchise, specified assets, or an interest in the
   24         franchise under certain circumstances; prohibiting a
   25         franchisor from preventing a franchisee from selling
   26         or transferring a franchise, assets of the franchise
   27         business, or an interest in the franchise under
   28         certain circumstances; requiring the franchisor to
   29         make available and to apply specified requirements for
   30         the approval of new or renewing franchises, under
   31         certain circumstances; creating s. 686.106, F.S.;
   32         requiring a franchisor and a franchisee to deal with
   33         each other in good faith; prohibiting the franchisor
   34         from acting in a certain manner; providing remedies;
   35         creating s. 686.107, F.S.; voiding certain contracts,
   36         contract provisions, or practices; creating s.
   37         686.108, F.S.; prohibiting the use of certain choice
   38         of venue and choice of law provisions, under certain
   39         circumstances; creating s. 686.109, F.S.; providing
   40         remedies for a franchisee or an aggrieved or injured
   41         person under certain circumstances; clarifying that
   42         specified remedies are in addition to existing
   43         remedies; creating s. 686.11, F.S.; providing
   44         applicability; amending s. 817.416, F.S.; defining the
   45         term “area franchise”; prohibiting waivers through
   46         certain contract provisions that would affect a
   47         person’s rights to make a claim; providing a directive
   48         to the Division of Law Revision and Information;
   49         providing an effective date.
   51  Be It Enacted by the Legislature of the State of Florida:
   53         Section 1. Section 686.101, Florida Statutes, is created to
   54  read:
   55         686.101 Short title.—Sections 686.101-686.11 may be cited
   56  as the “Protect Florida Small Business Act.”
   57         Section 2. Section 686.102, Florida Statutes, is created to
   58  read:
   59         686.102 Legislative findings and intent; construction of
   60  the act.
   61         (1) The Legislature finds that the welfare of franchisees,
   62  including the success and failure of their franchise businesses,
   63  greatly affects the general economy of this state, the public
   64  interest, and the public welfare. It is the intent of the
   65  Legislature to promote fair business relations between
   66  franchisees and franchisors and to protect franchisees against
   67  unfair treatment by franchisors. Therefore, it is necessary to
   68  regulate the conduct of franchisors and their representatives in
   69  order to prevent fraud, unfair business practices, unfair
   70  methods of competition, impositions, and other abuses upon
   71  franchisees in this state.
   72         (2) In order to promote the intent and policies announced
   73  in this section, the provisions of this act shall be liberally
   74  construed.
   75         Section 3. Section 686.103, Florida Statutes, is created to
   76  read:
   77         686.103 Definitions.—As used in this act, the term:
   78         (1) “Area franchise” means a contract or agreement,
   79  expressed or implied, written or oral, regardless of whether the
   80  contract or agreement is designated as a franchise, permit,
   81  license, resolution, contract, certificate, agreement, or
   82  otherwise, between a franchisor and another person through which
   83  that person is granted the right, for consideration in whole or
   84  in part for such right:
   85         (a) To sell or negotiate the sale of a franchise in the
   86  name or on behalf of the franchisor; or
   87         (b) To become an area developer and develop a franchise for
   88  the benefit of that person or that person’s affiliates.
   89         (2) “Area franchisee” means the owner of an area franchise.
   90         (3)(a) “Franchise” or “franchise agreement” means a
   91  contract or agreement, expressed or implied, written or oral,
   92  regardless of whether the contract or agreement is designated as
   93  a franchise, permit, license, resolution, contract, certificate,
   94  agreement, or otherwise, for a definite or indefinite time,
   95  between two or more persons by which:
   96         1. A franchisee is granted the right to engage in the
   97  business of offering, selling, or distributing goods or services
   98  under a marketing plan or system prescribed in substantial part
   99  by a franchisor;
  100         2. The operation of the franchise business pursuant to that
  101  marketing plan or system is substantially associated with the
  102  franchisor’s trademark, service mark, trade name, logotype,
  103  advertising, or other commercial symbol designating the
  104  franchisor or its affiliate; and
  105         3. The franchisee is required to pay, directly or
  106  indirectly, a franchise fee.
  107         (b) The term includes an area franchise.
  108         (c) The term does not include any of the following:
  109         1. A franchise governed by the Agricultural Equipment
  110  Manufacturers and Dealers Act.
  111         2. Any activity under ss. 686.501-686.506.
  112         3. A franchise governed by the Outdoor Power Equipment
  113  Manufacturers, Distributors, Wholesalers, and Servicing Dealers
  114  Act.
  115         4. A motor vehicle franchise or agreement governed by ss.
  116  320.60-320.70.
  117         5. A business relationship between a beer distributor and a
  118  manufacturer governed by s. 563.022.
  119         6. A professional sports franchise as described in s.
  120  288.11625(2)(c).
  121         (4) “Franchise fee” means a fee or charge greater than $100
  122  annually which a franchisee is required to pay or agrees to pay,
  123  directly or indirectly, to or for the benefit of the franchisor
  124  for the right to enter into or continue a franchise, including,
  125  but not limited to, a payment for goods or services. However, a
  126  fee or charge that a franchisee pays or agrees to pay the
  127  franchisor for goods at a bona fide wholesale price if no
  128  obligation is imposed upon the franchisee to purchase or pay for
  129  a quantity of goods in excess of that which a reasonable person
  130  normally would purchase by way of a starting inventory or supply
  131  or to maintain an ongoing inventory or supply is not considered
  132  a franchise fee.
  133         (5) “Franchisee” means a person to whom a franchise is
  134  offered or granted.
  135         (6) “Franchisor” means a person who grants a franchise to a
  136  franchisee.
  137         (7) “Person” means a natural person, corporation, limited
  138  liability company, association, partnership, trust, or other
  139  business entity and, in the case of a business entity, includes
  140  any other affiliate of such entity.
  141         Section 4. Section 686.104, Florida Statutes, is created to
  142  read:
  143         686.104 Termination or nonrenewal.—
  144         (1) Except as otherwise provided in this act, a franchisor
  145  may not terminate or refuse to renew a franchise except for good
  146  cause. The termination or nonrenewal of a franchise without good
  147  cause constitutes an actionable unfair termination. Except as
  148  provided in subsection (2), good cause is limited to the failure
  149  of the franchisee to substantially comply with the reasonable
  150  and material requirements imposed upon the franchisee by the
  151  franchise agreement after being given notice at least 90 days in
  152  advance of the termination and a reasonable opportunity, which
  153  may not be less than 60 days after the date of the notice of
  154  noncompliance, to cure the failure. If the franchisee cures the
  155  failure within the time given to cure, the termination notice is
  156  void.
  157         (2) A franchisor may give to a franchisee an immediate
  158  notice of termination without an opportunity to cure if, during
  159  the period in which the franchise is in effect, any one of the
  160  following events relevant to the franchise occurs:
  161         (a) The franchisee has been judicially determined to be
  162  insolvent, has had all or a substantial part of its assets
  163  assigned to or for the benefit of any creditor, or has admitted
  164  its inability to pay its debts as they come due.
  165         (b) The franchisee abandons, by failing to operate, the
  166  franchise business for 10 consecutive days during which, under
  167  the terms of the franchise, the franchisee is required to
  168  operate the franchise business unless such failure to operate is
  169  due to an act of God; a work stoppage; a strike or labor
  170  difficulty; a fire, flood, hurricane, or sinkhole; or other
  171  cause beyond the franchisee’s control.
  172         (c)The franchisee fails, for a period of 10 days after a
  173  notice of noncompliance, to comply with any federal, state, or
  174  local law or regulation, including, but not limited to, any
  175  health, safety, building, or labor law or regulation applicable
  176  to the operation of the franchise.
  177         (d)The franchisee is convicted of a felony if that felony
  178  significantly, directly, and adversely affects the operation of
  179  the franchise business.
  180         (e)The franchisor makes a reasonable determination that
  181  continued operation of the franchise business by the franchisee
  182  will result in imminent and substantial danger to public health
  183  or safety.
  184         Section 5. Section 686.105, Florida Statutes, is created to
  185  read:
  186         686.105 Sales, transfers, and assignments.—
  187         (1) A franchisor may not deny the surviving spouse, heir,
  188  or estate of a deceased franchisee or of a deceased person who
  189  controlled a majority interest in the franchise the opportunity
  190  to participate in the ownership of the franchise or franchise
  191  business under a valid franchise agreement for at least 180 days
  192  after the death of the franchisee or the death of a person
  193  controlling a majority interest in the franchise. During that
  194  time, the surviving spouse, heir, or estate of the deceased must
  195  either meet all of the existing reasonable qualifications for a
  196  purchaser of a franchise or must sell, transfer, or assign the
  197  franchise to a person who meets the franchisor’s existing
  198  reasonable qualifications for new franchisees. The rights
  199  granted to the surviving spouse, heir, or estate under this
  200  section are granted subject to the surviving spouse, heir, or
  201  estate of the deceased maintaining all standards and obligations
  202  of the franchise.
  203         (2)(a) A franchisee may sell, transfer, or assign a
  204  franchise, all or substantially all of the assets of the
  205  franchise business, or an interest in the franchise with the
  206  prior written consent of the franchisor. The franchisor’s
  207  consent may not be withheld unless the purchaser, transferee, or
  208  assignee does not meet the qualifications for new or renewing
  209  franchisees described in paragraph (b) or the franchisee and the
  210  purchaser, transferee, or assignee fail to comply with other
  211  reasonable transfer conditions specified in the franchise
  212  agreement.
  213         (b)A franchisor may not prevent a franchisee from selling,
  214  transferring, or assigning a franchise, all or substantially all
  215  of the assets of the franchise business, or an interest in the
  216  franchise to another person if the other person meets the
  217  franchisor’s reasonable qualifications for the approval of new
  218  or renewing franchisees in effect at the time the franchisor
  219  receives notice of the proposed sale, transfer, or assignment.
  220  The franchisor shall make this list of qualifications available
  221  to the franchisee, and the franchisor shall consistently apply
  222  such qualifications to similarly situated franchisees operating
  223  within the franchise brand.
  224         Section 6. Section 686.106, Florida Statutes, is created to
  225  read:
  226         686.106 Rights and prohibitions.—The following rights and
  227  prohibitions govern the relations between a franchisor and its
  228  franchisee:
  229         (1) The parties shall deal with each other in good faith
  230  and in a commercially reasonable manner.
  231         (2)A franchisor may not:
  232         (a) Terminate or fail to renew a franchise agreement in
  233  violation of this act;
  234         (b) Prevent a sale, transfer, or assignment of a franchise
  235  in violation of s. 686.105;
  236         (c) Violate the Florida Deceptive and Unfair Trade
  237  Practices Act or s. 817.416 in connection with its business as a
  238  franchisor, or an officer, agent, or other representative
  239  thereof;
  240         (d) Require a franchisee to assent to a release,
  241  assignment, novation, waiver, or estoppel that would relieve any
  242  person from liability imposed under this act, including, but not
  243  limited to, through the use of a disclaimer or checklist
  244  designed to avoid a protection under this act; or
  245         (e) Require a franchisee to assent to the use of a choice
  246  of law provision by selecting a different state’s law to govern
  247  the relationship of the parties.
  248         (3) A person who shows in a civil court of law a violation
  249  of this section is entitled to the remedies under s. 686.109.
  250         Section 7. Section 686.107, Florida Statutes, is created to
  251  read:
  252         686.107Unenforceable franchise agreement or other contract
  253  or part thereof.—A franchise agreement or other contract, or a
  254  part thereof or practice thereunder, which is in violation of
  255  any provision of this act is deemed against public policy and is
  256  void and unenforceable. An aggrieved party may choose to seek to
  257  void the portion of the agreement that is unenforceable and
  258  continue to enforce the remainder of the agreement.
  259         Section 8. Section 686.108, Florida Statutes, is created to
  260  read:
  261         686.108Venue; choice of law.—A provision in a franchise
  262  agreement restricting the venue to a forum outside of this state
  263  or selecting the law of any other state or jurisdiction other
  264  than this state is void with respect to any claim arising under
  265  or relating to a franchise agreement involving a franchisee that
  266  was, at the time of signing, a resident of this state or a
  267  business entity established in this state or involving a
  268  franchise business either operating or planning to be operated
  269  in this state. An agreement between a Florida-based franchisor
  270  and a franchisee with none of these stated connections to this
  271  state is not subject to this act, regardless of whether the
  272  franchise agreement contains a choice of law provision selecting
  273  this state.
  274         Section 9. Section 686.109, Florida Statutes, is created to
  275  read:
  276         686.109Remedies.
  277         (1) In addition to any relief specified in this act, any
  278  person aggrieved or injured in his or her business or property
  279  by any violation of this act may bring an action in the
  280  appropriate state or federal court of this state and shall
  281  recover the damages sustained and the costs of such action,
  282  including reasonable attorney fees.
  283         (2) Without regard and in addition to any other remedy or
  284  relief to which a person is entitled, any person aggrieved by a
  285  violation of this act may bring an action to obtain a
  286  declaratory judgment stating that an action or a practice
  287  violates this act and may obtain injunctive relief enjoining a
  288  franchisor that has violated, is violating, or is otherwise
  289  likely to violate these sections from committing the violation.
  290         (3)The remedies provided in this section are in addition
  291  to any other remedies provided by law or in equity, including,
  292  but not limited to, the Florida Deceptive and Unfair Trade
  293  Practices Act and s. 817.416.
  294         Section 10. Section 686.11, Florida Statutes, is created to
  295  read:
  296         686.11Applicability.
  297         (1) Any person or franchisor who engages directly or
  298  indirectly in an agreement or contract within this state in
  299  connection with a franchise; or any franchise whose franchisee
  300  is a resident of this state or is domiciled in this state or
  301  whose franchise business is, has been, or is intended to be
  302  operated in this state, is subject to this act and to the
  303  jurisdiction of the courts of this state, in accordance with the
  304  laws of this state, for violations of this act.
  305         (2) This act applies to:
  306         (a) Any franchise entered into, renewed, amended, or
  307  revised after the effective date of this act;
  308         (b) Any existing franchise of an indefinite duration which
  309  may be terminated by the franchisee or franchisor without cause;
  310  and
  311         (c) Any existing franchise entered into before the
  312  effective date of this act, only to the extent that this act
  313  does not significantly impair the existing contract rights
  314  between the parties.
  315         Section 11. Section 817.416, Florida Statutes, is amended
  316  to read:
  317         817.416 Franchises and distributorships;
  318  misrepresentations.—
  319         (1) DEFINITIONS.—For the purpose of this section, the term:
  320         (a) “Area franchise” has the same meaning as in s. 686.103.
  321         (d)(a)The term “Person” means an individual, partnership,
  322  corporation, association, or other entity doing business in this
  323  state Florida.
  324         (b) The term “Franchise or distributorship” means a
  325  contract or agreement, either expressed or implied, whether oral
  326  or written, between two or more persons:
  327         1. Wherein a commercial relationship of definite duration
  328  or continuing indefinite duration is involved;
  329         2. Wherein one party, hereinafter called the “franchisee,”
  330  is granted the right to offer, sell, and distribute goods or
  331  services manufactured, processed, distributed or, in the case of
  332  services, organized and directed by another party;
  333         3. Wherein the franchisee as an independent business
  334  constitutes a component of franchisor’s distribution system; and
  335         4. Wherein the operation of the franchisee’s business
  336  franchise is substantially reliant on franchisors for the basic
  337  supply of goods.
  338         (c) The term “Goods” means any article or thing without
  339  limitation, or any part of such article or thing, including any
  340  article or thing used or consumed by a franchisee in rendering a
  341  service established, organized, directed, or approved by a
  342  franchisor.
  343         (2) DECLARATIONS.—
  344         (a) It is unlawful, when selling or establishing a
  345  franchise or area franchise distributorship, for any person to:
  346         1. Intentionally to misrepresent the prospects or chances
  347  for success of a proposed or existing franchise or area
  348  franchise distributorship;
  349         2. Intentionally to misrepresent, by failure to disclose or
  350  otherwise, the known required total investment for such
  351  franchise or area franchise distributorship; or
  352         3. Intentionally to misrepresent or fail to disclose
  353  efforts to sell or establish more franchises or area franchises
  354  distributorships than is reasonable to expect the market or
  355  market area for the particular franchise or area franchise
  356  distributorship to sustain.
  357         (b) The execution or carrying out of a scheme, plan, or
  358  corporate organization which violates any of the provisions of
  359  this section, if knowledge or intent be proved, is shall be a
  360  misdemeanor of the second degree, punishable as provided in ss.
  361  775.082 and 775.083.
  362         (3) WAIVER.—The applicability of this section may not be
  363  waived by any choice of venue clause, choice of law clause,
  364  checklist, or any other contract provision, scheme, or device
  365  that would otherwise affect a person’s rights to make a claim
  366  under this section.
  367         (4)(3) CIVIL PROVISIONS.—Any person, who shows in a civil
  368  court of law a violation of this section may receive a judgment
  369  for all moneys invested in the such franchise or area franchise
  370  distributorship. Upon such a showing, the court may award any
  371  person bringing said action reasonable attorney fees attorney’s
  372  fees and shall award such person reasonable costs incurred in
  373  bringing the action, and execution shall thereupon issue.
  374         (5)(4) INJUNCTIONS.—The Department of Legal Affairs, or the
  375  Department of Legal Affairs and the Department of Agriculture
  376  and Consumer Services jointly, may sue in behalf of the people
  377  of this state for injunctive relief against franchise or area
  378  franchise distributorship plans or activities in violation of
  379  paragraph (2)(a).
  380         Section 12. The Division of Law Revision and Information is
  381  directed to replace the phrase “the effective date of this act”
  382  wherever it occurs in this act with the date the act becomes a
  383  law.
  384         Section 13. This act shall take effect upon becoming a law.