| 1 | 1 | | 25 LC 60 0175 |
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| 2 | 2 | | Senate Bill 376 |
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| 3 | 3 | | By: Senator Robertson of the 29th |
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| 4 | 4 | | A BILL TO BE ENTITLED |
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| 5 | 5 | | AN ACT |
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| 6 | 6 | | To amend Chapter 1 of Title 10 of the Official Code of Georgia Annotated, relating to selling |
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| 7 | 7 | | 1 |
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| 8 | 8 | | and other trade practices, so as to enact the "Georgia Restaurant Franchise Relations Act";2 |
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| 9 | 9 | | to prohibit a franchisor from terminating a franchise except under certain circumstances; to3 |
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| 10 | 10 | | provide for circumstances which warrant the termination of a franchise; to provide conditions4 |
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| 11 | 11 | | for arbitration; to provide for the renewal of a franchise; to prohibit a franchisor from5 |
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| 12 | 12 | | discriminating against franchise operations over franchisor owned operations; to prohibit6 |
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| 13 | 13 | | forum selection; to provide that a franchisor shall provide an opportunity for the survivor of7 |
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| 14 | 14 | | a deceased franchisee to operate the franchise; to provide for definitions; to provide for8 |
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| 15 | 15 | | penalties; to provide for related matters; to provide for an effective date and applicability; to9 |
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| 16 | 16 | | repeal conflicting laws; and for other purposes.10 |
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| 17 | 17 | | BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:11 |
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| 18 | 18 | | SECTION 1.12 |
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| 19 | 19 | | Chapter 1 of Title 10 of the Official Code of Georgia Annotated, relating to selling and other13 |
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| 20 | 20 | | trade practices, is amended by enacting a new article to read as follows:14 |
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| 21 | 21 | | S. B. 376 |
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| 22 | 22 | | - 1 - 25 LC 60 0175 |
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| 23 | 23 | | "ARTICLE 3715 |
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| 24 | 24 | | Part 116 |
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| 25 | 25 | | 10-1-960.17 |
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| 26 | 26 | | This chapter shall be known and may be cited as the 'Georgia Restaurant Franchise18 |
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| 27 | 27 | | Relations Act.'19 |
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| 28 | 28 | | 10-1-961.20 |
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| 29 | 29 | | As used in this chapter, the term:21 |
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| 30 | 30 | | (1) 'Area franchise' means any contract or agreement between a franchisor and a22 |
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| 31 | 31 | | subfranchisor whereby the subfranchisor is granted the right, for consideration given in23 |
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| 32 | 32 | | whole or in part for such right, to sell or negotiate the sale of franchises in the name or24 |
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| 33 | 33 | | on behalf of the franchisor.25 |
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| 34 | 34 | | (2)(A) 'Franchise' means a contract or agreement, either expressed or implied, whether26 |
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| 35 | 35 | | oral or written, between two or more persons by which:27 |
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| 36 | 36 | | (i) A franchisee is granted the right to engage in the business of offering, selling, or28 |
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| 37 | 37 | | distributing food or food services under a marketing plan or system prescribed in29 |
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| 38 | 38 | | substantial part by a franchisor;30 |
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| 39 | 39 | | (ii) The operation of the franchisee's business pursuant to that plan or system is31 |
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| 40 | 40 | | substantially associated with the franchisor's trademark, trade dress, service mark,32 |
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| 41 | 41 | | trade name, logotype, advertising, or other commercial symbol designating the33 |
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| 42 | 42 | | franchisor or its affiliate; and34 |
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| 43 | 43 | | (iii) The franchisee is required to pay, directly or indirectly, a franchise fee.35 |
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| 44 | 44 | | (B) Such term does not include any of the following:36 |
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| 45 | 45 | | (i) Lease departments, licenses, or concessions at or with a general merchandise retail37 |
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| 46 | 46 | | establishment where the lease department, licensee, or concessionaire is incidental38 |
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| 47 | 47 | | and ancillary to the general commercial operation of the retail establishment. Sales39 |
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| 48 | 48 | | S. B. 376 |
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| 49 | 49 | | - 2 - 25 LC 60 0175 |
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| 50 | 50 | | of a lease department, license, or concessionaire are incidental and ancillary to the40 |
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| 51 | 51 | | general commercial operation of the retail establishment if they amount to less than41 |
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| 52 | 52 | | 10 percent of the establishment's sales; or42 |
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| 53 | 53 | | (ii) A nonprofit organization operated on a cooperative basis by and for independent43 |
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| 54 | 54 | | retailers which wholesales goods and services primarily to its member retailers and44 |
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| 55 | 55 | | in which:45 |
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| 56 | 56 | | (I) Control and ownership of each member is substantially equal;46 |
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| 57 | 57 | | (II) Membership is limited to those who will use the services furnished by the47 |
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| 58 | 58 | | organization;48 |
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| 59 | 59 | | (III) Transfer of ownership is prohibited or limited;49 |
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| 60 | 60 | | (IV) Capital investments receive no return;50 |
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| 61 | 61 | | (V) Substantially equal benefits pass to the members on the basis of patronage of51 |
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| 62 | 62 | | the organization;52 |
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| 63 | 63 | | (VI) Members are not personally liable for obligations of the organization in the53 |
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| 64 | 64 | | absence of a direct undertaking or authorization by them;54 |
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| 65 | 65 | | (VII) Services of the organization are furnished primarily for the use of the55 |
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| 66 | 66 | | members;56 |
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| 67 | 67 | | (VIII) Each member and prospective member is provided with an offering circular;57 |
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| 68 | 68 | | (IX) No part of the receipts, income, or profit of the organization is paid to any58 |
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| 69 | 69 | | profit-making entity, except for arm's length payments for necessary goods and59 |
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| 70 | 70 | | services, and members are not required to purchase goods or services from any60 |
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| 71 | 71 | | designated profit-making entity; and61 |
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| 72 | 72 | | (X) The nonprofit organization is subject to an action for rescission or damages if62 |
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| 73 | 73 | | the organization fraudulently induced the plaintiff to join the organization.63 |
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| 74 | 74 | | (3) 'Franchisee' means a person to whom a franchise is granted.64 |
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| 75 | 75 | | (4) 'Franchise fee' means any fee or charge that a franchisee or subfranchisor is required65 |
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| 76 | 76 | | to pay or agrees to pay for the right to enter into a business under a franchise agreement,66 |
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| 77 | 77 | | S. B. 376 |
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| 78 | 78 | | - 3 - 25 LC 60 0175 |
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| 79 | 79 | | including, but not limited to, any such payment for such goods and services; provided,67 |
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| 80 | 80 | | however, that the following shall not be considered the payment of a franchise fee:68 |
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| 81 | 81 | | (A) The purchase or agreement to purchase goods at a bona fide wholesale price if no69 |
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| 82 | 82 | | obligation is imposed upon the purchaser to purchase or pay for a quantity of such70 |
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| 83 | 83 | | goods in excess of that which a reasonable businessperson normally would purchase by71 |
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| 84 | 84 | | way of a starting inventory or supply or to maintain an ongoing inventory or supply;72 |
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| 85 | 85 | | (B) The payment of a reasonable service charge to the issuer of a credit card by an73 |
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| 86 | 86 | | establishment accepting or honoring such credit card;74 |
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| 87 | 87 | | (C) The payment, directly or indirectly, of a franchise fee which, on an annual basis,75 |
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| 88 | 88 | | does not exceed the sum of $100.00; or76 |
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| 89 | 89 | | (D) The payment of a sum of not exceeding $1,000.00 annually on account of the77 |
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| 90 | 90 | | purchase price or rental of fixtures, equipment, or other tangible property to be utilized78 |
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| 91 | 91 | | in, and which is necessary for, the operation of the franchised business, if the price or79 |
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| 92 | 92 | | rental so charged does not exceed the cost which would be incurred by the franchisee80 |
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| 93 | 93 | | acquiring the item or items from other persons or in the open market.81 |
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| 94 | 94 | | (5) 'Franchisor' is a person who grants or has granted a franchise.82 |
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| 95 | 95 | | (6) 'Person' means an individual, a corporation, a partnership, a limited liability83 |
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| 96 | 96 | | company, a joint venture, an association, a joint stock company, a trust, or an84 |
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| 97 | 97 | | unincorporated organization.85 |
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| 98 | 98 | | Part 286 |
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| 99 | 99 | | 10-1-965.87 |
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| 100 | 100 | | Except as otherwise provided by this chapter, no franchisor may terminate a franchise prior88 |
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| 101 | 101 | | to the expiration of its term, except for good cause. Good cause shall include, but shall not89 |
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| 102 | 102 | | be limited to, the failure of the franchisee to comply with any lawful requirement of the90 |
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| 103 | 103 | | franchise agreement after being given at least 90 days' notice to cure the failure. If the91 |
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| 104 | 104 | | S. B. 376 |
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| 105 | 105 | | - 4 - 25 LC 60 0175 |
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| 106 | 106 | | franchisor is the sole provider of goods or services under the terms of the franchise92 |
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| 107 | 107 | | agreement, the franchisor may not suspend the sale of goods or the provision of services93 |
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| 108 | 108 | | during the period allowed to cure any such failure.94 |
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| 109 | 109 | | 10-1-966.95 |
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| 110 | 110 | | All notices of termination or nonrenewal required by this chapter shall:96 |
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| 111 | 111 | | (1) Be in writing;97 |
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| 112 | 112 | | (2) Be posted by registered, certified, or other receipted mail, delivered by email or by98 |
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| 113 | 113 | | other electronic means, or personally delivered to the franchisee; and99 |
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| 114 | 114 | | (3) Contain a statement of intent to terminate or not to renew the franchise, together with100 |
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| 115 | 115 | | the reasons therefor and the effective date of such termination, nonrenewal, or expiration.101 |
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| 116 | 116 | | 10-1-967.102 |
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| 117 | 117 | | If, during the period in which the franchise is in effect, there occur any of the following103 |
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| 118 | 118 | | events which are relevant to the franchise, immediate notice of termination without an104 |
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| 119 | 119 | | opportunity to cure shall be deemed reasonable:105 |
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| 120 | 120 | | (1) The franchisee or the business to which the franchise relates is declared bankrupt or106 |
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| 121 | 121 | | judicially determined to be insolvent, or all or a substantial part of the assets thereof are107 |
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| 122 | 122 | | assigned to or for the benefit of any creditor, or the franchisee admits his or her inability108 |
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| 123 | 123 | | to pay his or her debts as they come due;109 |
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| 124 | 124 | | (2) The franchisor and franchisee agree in writing to terminate the franchise;110 |
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| 125 | 125 | | (3) The franchisee makes any material misrepresentations relating to the acquisition of111 |
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| 126 | 126 | | the franchise business or the franchisee engages in conduct which reflects materially and112 |
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| 127 | 127 | | unfavorably upon the operation and reputation of the franchise business or system;113 |
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| 128 | 128 | | (4) The franchisee repeatedly fails to comply with one or more requirements of the114 |
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| 129 | 129 | | franchise, but in no event where the franchisee takes corrective action pursuant to Code115 |
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| 130 | 130 | | Section 10-1-965 to remedy such failure after proper notice;116 |
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| 131 | 131 | | S. B. 376 |
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| 132 | 132 | | - 5 - 25 LC 60 0175 |
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| 133 | 133 | | (5) The franchised business or business premises of the franchise is seized, taken over,117 |
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| 134 | 134 | | or foreclosed by a government official in the exercise of his or her duties or seized, taken118 |
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| 135 | 135 | | over, or foreclosed by a creditor, lienholder, or lessor if:119 |
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| 136 | 136 | | (A) A final judgment against the franchisee remains unsatisfied for 30 days unless a120 |
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| 137 | 137 | | supersedeas or other appeal bond has been filed; or121 |
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| 138 | 138 | | (B) A levy of execution has been made upon the license granted by the franchise122 |
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| 139 | 139 | | agreement or upon any property used in the franchised business, and it is not discharged123 |
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| 140 | 140 | | within five days of such levy; or124 |
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| 141 | 141 | | (6) The franchisee is convicted of a felony or any other criminal misconduct which is125 |
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| 142 | 142 | | relevant to the operation of the franchise.126 |
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| 143 | 143 | | 10-1-968.127 |
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| 144 | 144 | | Nothing contained in this article shall limit the right of a franchisor and franchisee to agree128 |
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| 145 | 145 | | before or after a dispute has arisen to binding arbitration of claims under this chapter,129 |
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| 146 | 146 | | provided that:130 |
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| 147 | 147 | | (1) The standards applied in such arbitration are not less than the requirements specified131 |
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| 148 | 148 | | in this chapter; and132 |
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| 149 | 149 | | (2) The arbitrator or arbitrators employed in such arbitration are chosen from a list of133 |
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| 150 | 150 | | impartial arbitrators supplied by the American Arbitration Association or other impartial134 |
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| 151 | 151 | | person.135 |
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| 152 | 152 | | 10-1-969.136 |
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| 153 | 153 | | If a franchisor consents to a franchisee continuing to operate a franchise for 30 days or137 |
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| 154 | 154 | | more after the expiration of a franchise agreement, such franchise agreement shall be138 |
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| 155 | 155 | | deemed to have been renewed for the same term and under the same conditions as the139 |
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| 156 | 156 | | original agreement. For purposes of this Code section, a failure to take affirmative action140 |
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| 157 | 157 | | to prevent operation shall be considered a consent to operate.141 |
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| 158 | 158 | | S. B. 376 |
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| 159 | 159 | | - 6 - 25 LC 60 0175 |
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| 160 | 160 | | Part 3142 |
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| 161 | 161 | | 10-1-975.143 |
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| 162 | 162 | | If a franchisor operates facilities in this state, it may not require higher standards with144 |
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| 163 | 163 | | regard to physical plant, employee attire, product offerings, or pricing or in any other145 |
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| 164 | 164 | | material way differentiate a franchise facility from a facility owned or operated by the146 |
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| 165 | 165 | | franchisor.147 |
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| 166 | 166 | | 10-1-976.148 |
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| 167 | 167 | | Any condition, stipulation, or provision in a franchise agreement requiring the application149 |
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| 168 | 168 | | of the law of another state or selecting venue in a particular court is void and150 |
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| 169 | 169 | | unenforceable.151 |
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| 170 | 170 | | 10-1-977.152 |
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| 171 | 171 | | No franchisor shall deny the surviving spouse, heirs, or estate of a deceased franchisee or153 |
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| 172 | 172 | | the majority shareholder of the franchisee the opportunity to continue to participate in the154 |
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| 173 | 173 | | ownership of the franchise under the franchise agreement between the franchisee and155 |
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| 174 | 174 | | franchisor. No franchisor shall require any training or qualification for any such person for156 |
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| 175 | 175 | | a period of six months following the death of the franchisee or principal shareholder;157 |
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| 176 | 176 | | provided, however, that, during such period, the surviving spouse, heirs, or estate of the158 |
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| 177 | 177 | | deceased shall maintain all lawful standards and obligations of the franchise.159 |
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| 178 | 178 | | 10-1-978.160 |
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| 179 | 179 | | Any condition, stipulation, or provision purporting to bind any person to waive compliance161 |
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| 180 | 180 | | with any provision of this chapter is contrary to public policy and therefore void.162 |
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| 181 | 181 | | S. B. 376 |
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| 182 | 182 | | - 7 - 25 LC 60 0175 |
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| 183 | 183 | | 10-1-979.163 |
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| 184 | 184 | | The provisions of this article shall apply to any franchise where either the franchisee is164 |
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| 185 | 185 | | domiciled in this state or the franchised business is or has been operated in this state.165 |
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| 186 | 186 | | 10-1-980.166 |
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| 187 | 187 | | Any violation of this article by a franchisor shall be an unfair trade practice subject to the167 |
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| 188 | 188 | | provisions of Part 2 of Article 15 of this chapter, the 'Fair Business Practices Act of 1975.' 168 |
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| 189 | 189 | | In addition, any individual who is harmed as a result of a violation of this article shall have169 |
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| 190 | 190 | | a cause of action against the person whose violation caused the harm."170 |
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| 191 | 191 | | SECTION 2.171 |
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| 192 | 192 | | This Act shall become effective on July 1, 2025, and shall apply to all franchises entered into172 |
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| 193 | 193 | | on or after such effective date, and to any renewals, modifications, or extensions of such 173 |
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| 194 | 194 | | franchises entered into on or after such effective date.174 |
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| 195 | 195 | | SECTION 3.175 |
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| 196 | 196 | | All laws and parts of laws in conflict with this Act are repealed.176 |
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| 197 | 197 | | S. B. 376 |
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| 198 | 198 | | - 8 - |
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