Pennsylvania HB 1620, the “Responsible Franchise Practices Bill”

Pennsylvania HB 1620, known as the “Responsible Franchise Practices Bill”, attempts to bring a balance to the franchisor/franchisee relationship for Pennsylvania franchisees. Pennsylvania, a state that currently does not have a franchise law, has a proposed bill that will have a tremendous impact on the franchise community. The bill attempts to make franchise agreements more equitable and fair.

The stated purpose of the bill is to guaranty fairness in the franchisee/franchisor relationship and eliminate “arbitrariness, coercion, and duress.”  The bill poses limitations on a franchisor’s rights to terminate a franchise agreement and the reasons a franchisor may terminate the agreement.  The proposed legislation also poses limitations on a franchisor’s right not to renew a franchise agreement. Additionally the bill restricts a franchisor’s ability to contractually limit a franchisee’s rights to transfer the franchise, among others.

The bill negates any clauses limiting a franchisee from obtaining sources of goods and products only through the franchisor, stating that a franchisee must be free to obtain necessary equipment, supplies, services and goods from any number of approved sources.  Clauses in the franchise agreement that waive franchisee rights, mandate judicial forums, prohibit trade associations, etc., are prohibited.

The bill establishes the Pennsylvania Department of Community and Economic Development as the department that may enforce the bill.  The bill allows franchisees a private right of action against a franchisor, as well as civil and possible criminal penalties of enforcement.

If passed, this bill could be the strictest franchise relationship law in the country and will have a monumental impact on franchisees, franchisors, and, perhaps, even the laws of other states.

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