Stricken language would be deleted from and underlined language would be added to present law.
Act 847 of the Regular Session
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State of Arkansas As Engrossed: H4/4/23 S4/5/23 1
94th General Assembly A Bill 2
Regular Session, 2023 HOUSE BILL 1783 3
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By: Representatives Wardlaw, F. Allen, Beaty Jr., Bentley, M. Berry, Dalby, Ennett, Eubanks, K. 5
Ferguson, V. Flowers, Gramlich, Hawk, G. Hodges, Holcomb, Hollowell, Jean, Ladyman, Lynch, Magie, 6
McClure, M. McElroy, B. McKenzie, Milligan, Nicks, Pearce, Perry, Puryear, J. Richardson, Richmond, 7
Rye, Schulz, Steimel, Unger, Vaught, Warren, D. Whitaker, Wooldridge 8
By: Senators Hill, J. Boyd, J. Bryant, Crowell, B. Davis, Dees, Flippo, K. Hammer, Hester, Irvin, B. 9
Johnson, M. Johnson, F. Love, M. McKee, J. Payton, J. Petty, Stone, G. Stubblefield, D. Wallace 10
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For An Act To Be Entitled 12
AN ACT TO AMEND THE ARKANSAS FRANCHISE P RACTICES ACT; 13
AND FOR OTHER PURPOS ES. 14
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Subtitle 17
TO AMEND THE ARKANSAS FRANCHISE PRACTICES 18
ACT. 19
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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 22
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SECTION 1. DO NOT CODIFY. Legislative findings. 24
The General Assembly finds that: 25
(1) It is necessary to clarify the applicability of the Arkansas 26
Franchise Practices Act, § 4 -72-201 et seq., specifically as it relates to 27
amendments to the Arkansas Franchise Practices Act, § 4 -72-201 et seq., 28
enacted by Acts 1991, No. 411; 29
(2) When the Arkansas Franchise Practices Act, § 4 -72-201 et 30
seq., was passed in Acts 1977, No. 355, the emergency clause expressed a 31
public interest and necessity in defining "the relationship and 32
responsibilities of franchisors and franchisees in connection with franchise 33
agreements"; 34
(3) Acts 1991, No. 411, ame nded the Arkansas Franchise Practices 35
Act, § 4-72-201 et seq., to include language that might be interpreted to 36 As Engrossed: H4/4/23 S4/5/23 HB1783
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exempt franchises subject to the Federal Trade Commission regulations 1
"Disclosure Requirements and Prohibitions concerning Franchising and Busin ess 2
Opportunity Ventures," 16 C.F.R. § 436.1; 3
(4) The subject matter of the federal regulations in 16 C.F.R. § 4
436.1 et seq. involves mandatory pre -agreement disclosure requirements that 5
apply to virtually all franchise agreements while the subject matt er of the 6
Arkansas Franchise Practices Act, § 4 -72-201 et seq., involves post -agreement 7
protection for both franchisors and franchisees; 8
(5) In Lodging Development & Management Inc. v. Days Inn 9
Worldwide, Inc., 2001 U.S. Dist. LEXIS 26089, 2001 WL 35756 572 (E.D. Ark. 10
Oct. 18, 2001), the court came to a logical conclusion stating "it is 11
difficult to imagine that the General Assembly intended [in Acts 1991, No. 12
411] to eviscerate every substantive post -agreement protection for both 13
franchisors and franchis ees contained in the Arkansas Franchise Practices 14
Act, § 4-72-201 et seq., with a passing reference to a federal regulation 15
concerning with pre-agreement disclosures"; 16
(6) The amendment to § 4 -72-203 in this act clarifies that: 17
(A) A franchise agree ment entered into, renewed, or 18
transferred after March 4, 1977, the performance of which contemplates or 19
requires the franchise to establish or maintain a place of business within 20
this state, is subject to the Arkansas Franchise Practices Act, § 4 -72-201 et 21
seq., unless otherwise expressly excluded; and 22
(B) Acts 1991, No. 411 was simply intended to affirm that 23
the regulations under 16 C.F.R. § 436.1 stated the pre -agreement disclosure 24
requirements for franchises covered by the Arkansas Franchise Practic es Act, 25
§ 4-72-201 et seq.; 26
(7) The distribution and sales through franchises conducting 27
business in this state are vital to the public interest and welfare as well 28
as to the state's economy; 29
(8) It is in the public interest to further define the 30
relationship and responsibilities of franchisors and franchisees with 31
franchise agreements to: 32
(A) Protect franchisees from unreasonable termination by 33
franchisors that may result from the economic imbalance between franchisors 34
and franchisees, the absenc e of free bargaining, and the commercially 35
unreasonable practices of some franchisors engaging in business in this 36 As Engrossed: H4/4/23 S4/5/23 HB1783
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state; 1
(B) Maintain strong and sound franchises that are 2
essential to providing continuing and reliable services to the consuming 3
public in this state; and 4
(C) Provide suitable and stable employment to the citizens 5
of this state; and 6
(9) It is necessary to establish this public policy to protect 7
the public interest in regulation of franchise agreements. 8
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SECTION 2. Arkansas Code § 4-72-202, concerning definitions under the 10
Arkansas Franchise Practices Act, is amended to add an additional subdivision 11
to read as follows: 12
(9) "Franchise owner" means a person who: 13
(A) Owns a financial interest in a franchise; or 14
(B) Has guaranteed the obligations of a person or legal 15
entity under a franchise agreement. 16
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SECTION 3. Arkansas Code § 4 -72-203 is amended to read as follows: 18
4-72-203. Applicability of subchapter. 19
(a)(1) This subchapter applies only to a franchise entered into, 20
renewed, or transferred after March 4, 1977, the performance of which 21
contemplates or requires the franchise to establish or maintain a place of 22
business within the State of Arkansas. 23
(2) To the fullest extent permitted by the United States 24
Constitution and the Arkansas Constitution, this subsection is intended to 25
apply to a franchise: 26
(A) In existence on the effective date of this act; and 27
(B) Granted, renewed, or transferred after the effective 28
date of this act. 29
(b) However, the provisions of this This subchapter shall does not 30
apply to those business relations, actions, transactions, or franchises 31
subject to the provisions of § 4-72-401 et seq. and § 4-72-501 et seq., or 32
which are subject to the Federal Trade Commission regulations, “Disclosure 33
Requirements and Prohibitions Concerning Franchising and Business Opportunity 34
Ventures", 16 C.F.R. 436.1 et seq. or to any franchise for which the initial 35
franchise fee paid by the franchisee or franchise owner to the franchisor 36 As Engrossed: H4/4/23 S4/5/23 HB1783
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does not exceed twenty thousand dollars ($20,000) and the initial term of the 1
franchise does not exceed one (1) year. 2
(c) Notwithstanding the provisions of subsection (b) of this section, 3
this subchapter applies to th e relationship between a wholesaler and a 4
supplier of wine, spirits, beer, nonalcoholic beverages, or any other 5
alcoholic beverage regardless of the initial franchise fee, if any, or 6
initial term of the franchise. 7
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SECTION 4. Arkansas Code § 4 -72-205 is amended to read as follows: 9
4-72-205. Transfer, assignment, or sale of franchise. 10
(a) It shall be Except as provided in subsection (d) of this section, 11
it is a violation of this subchapter for any a franchisee or a franchise 12
owner to transfer, assign, or sell a franchise or interest therein to another 13
person unless the franchisee or the franchise owner first notifies the 14
franchisor of that intention by written notice, setting forth stating in the 15
notice of intent the prospective transferee's name, address, statement of 16
financial qualification, and business experience during the previous five (5) 17
years. 18
(b)(1) The Within thirty (30) days after receipt of the notice under 19
subsection (a) of this section, the franchisor shall within sixty (60) days 20
after receipt of the notice either: 21
(A) approve Approve in writing to the franchisee or to the 22
franchise owner the sale, transfer, or assignment to the proposed transferee; 23
or 24
(B) by By written notice advise the franchisee and 25
franchise owner of the unacceptability of the proposed transferee, setting 26
forth stating a material reason deficiency relating to the character, 27
financial ability, or business experience of the proposed transferee based on 28
the application of the franchisor's then-existing standards consistently and 29
uniformly applied to similarly situated franchisees operating within the 30
franchise brand. 31
(2) If the franchisor does not reply within the specified sixty 32
(60) thirty (30) days, his or her the franchisor's approval is deemed 33
granted. 34
(c) No A transfer, assignment, or sale pursuant to under this section 35
shall not be valid unless the transferee agrees in writing to comply with all 36 As Engrossed: H4/4/23 S4/5/23 HB1783
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of the reasonable and legal requirements of the franchise then in effect. 1
(d) A franchisor's approval is not required for a transfer of a 2
franchise by a franchisee or franchise owner to the spouse, child, or heir of 3
the franchisee or franchise owner who is operationally and financially 4
qualified. 5
(e) It is a violation of this subchapter for a franchisor or the 6
franchisor's related entities, affiliates, or assigns to exercise a right of 7
first refusal with respect to a franchisee's transfer, assignment, or sale in 8
the case of a transfer, sale, or assignment under subsection (d) of this 9
section. 10
(f) Except as provided in subsection (d) of this section, this section 11
does not prohibit a franchisor from exercising a contractual right of first 12
refusal to purchase a franchise or all or substantially all of the assets of 13
a franchise business after receiving a bona fide offer from a proposed 14
purchaser to purchase the franchise or assets of a franchise business on 15
precisely the terms and conditions stated in the bona fide offer. 16
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SECTION 5. Arkansas Code Title 4, Chapter 72, Subchapter 2, is amended 18
to add additional sections to read as follows: 19
4-72-211. Venue restriction — Void. 20
Any provision of a franchise agreement that restricts venue to a forum 21
outside the State of Arkansas is void with respect to any claims arising 22
under or relating to a franchise agreement involving a franchise operating or 23
conducting business in this state. 24
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4-72-212. Duties of good faith and fair dealing — Termination — Rights 26
of survivors. 27
(a) A transaction under this subchapter shall be consistent with the 28
governing principles and the obligation of good faith and fair dealing. 29
(b) A franchisor may terminate a franchise agreement only for material 30
cause as determined under objective standards. 31
(c)(1) A survivor of a franchisee shall be treated in goo d faith and 32
provided a sufficient opportunity to become an owner of the franchise. 33
(2) As used in subdivision (c)(1) of this section, "survivor" 34
means an immediate family member or designated heir of the franchisee or 35
franchise owner. 36 As Engrossed: H4/4/23 S4/5/23 HB1783
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SECTION 6. DO NOT CODIFY. Severability. If any provision or section 2
of this act or the application thereof to any person or circumstance is held 3
invalid, the invalidity shall not affect other provisions or applications of 4
the act that can be given effect without the invalid provisions or 5
applications, and to this end the provisions of the act are declared to be 6
severable. 7
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SECTION 7. DO NOT CODIFY. Retroactivity. 9
(a) Sections 1 and 3 of this act apply retroactively to the effective 10
date of Acts 1991, No. 4 11. 11
(b) Sections 2, 4, and 5 of this act only apply to franchise 12
agreements or contracts entered into or renewed on and after the effective 13
date of this act. 14
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/s/Wardlaw 16
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APPROVED: 4/13/23 19
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