HB 1772 -- Small Business Franchise Act

Sponsor:  Reynolds

This bill regulates various franchise transactions.  In its main
provisions, the bill:

(1)  Outlines illegal practices in connection with the
advertising, offering, sale, or promotion of any franchise;

(2)  Outlines unlawful behaviors in connection with disclosure
documents, notices, or reports, with these provisions effective
90 days after the effective date of the bill;

(3)  Prohibits certain actions in connection with the
performance, enforcement, renewal, or termination of any
franchise agreement, including fraud and discrimination;

(4)  Prohibits a franchisor from terminating a franchise
agreement prior to its expiration without good cause;

(5)  Specifies that a franchisor may not prohibit a franchisee
from engaging in any business at any location after the
franchise agreement has expired;

(6)  Stipulates that a duty to act in good faith is imposed on
each party to a franchise contract;

(7)  Stipulates that duty of due care is imposed on the
franchisor by a franchise agreement;

(8)  States that the franchisor owes a fiduciary duty to its
franchisees and is required to exercise the highest standard of
care for franchisee interests under certain conditions;

(9)  Requires franchisors who administer or supervise the funds
or accounting functions for franchisees to keep all related
moneys in a separate account and to provide an independent audit
of the account;

(10)  Allows a franchisee to assign an interest in a franchised
business to certain transferees, with a minimum 30-days written
notice to the franchisor;

(11)  Outlines the conditions the franchisor may require for
approved transfers and specifies those occurrences which do not
constitute transfers requiring the consent of the franchisor;

(12)  Allows a franchisee to assign his or her interest in the
franchise for the unexpired term of the franchise agreement;

(13)  Outlines the conditions under which a franchisor is
allowed to sell or transfer interest in a franchise;

(14)  Prohibits a franchisor from restricting a franchisee from
obtaining equipment, supplies, or services used in the operation
of the franchise from a source of the franchisee's choosing,
within certain broad limits;

(15)  Requires franchisors to report at least once a year the
amount of revenue and profit earned from the sale of equipment,
fixtures, supplies, or services to their franchisees;

(16)  Restricts a franchisor from placing new outlets for a
franchised business in unreasonable proximity to an established
outlet of a similar kind of franchised business;

(17)  Authorizes the state to bring a civil action when the
Attorney General has reason to believe that the interests of
Missouri residents are adversely affected due to a violation of
the provisions of the bill; and

(18)  Authorizes any party to a franchise who is injured by a
violation of the provisions of the bill to a right of action for
recission and restitution, and for all damages and injunctive
relief.

The provisions of the bill apply to franchise transactions
occurring after the effective date of the bill.