Both Vermont and Arizona are proposing legislation in 2012 that would further regulate the relationship between franchisors, franchisees, and business opportunities.
The Vermont legislature has introduced a bill in its House of Representatives which proposes to do the following:
- Define a franchise and restrict the circumstances under which a franchisor may terminate a franchisee prior to the expiration of a franchise agreement to "good cause".
- Impose a duty of good faith on parties to a franchise agreement.
- Prohibit franchisors from restricting a franchisee’s right to associate.
- Outline further regulations on transfers, sales, and encroachment issues.
The bill (House Bill 694) is currently pending before the Commerce and Economic Development Committee of the Vermont House of Representatives.
Arizona legislators have also introduced legislation which would require the registration of sellers of business opportunities and the disclosure of certain information in the form of a disclosure document. Under House Bill 2825, a seller would be required to present the disclosure document to a potential purchaser at least 5 business days prior to execution of a contract or collection of any money. Like many similar state business opportunity laws, the law would provide an exemption for the sale of franchises as defined under the FTC Rule.
Both the Vermont and Arizona bills are in the early stages but we will report on further movement through the legislation as it may arise.