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Florida Small Business Parity Act

by on General

Florida Senate had recently passed SB 1076 known as the Florida Small Business Parity Act.  The Florida Small Business Parity Act is an attempt by the Florida legislature to ensure that Franchisees owning a Franchise are on a more even playing field with their Franchisor.

The proposed Florida Small Business Parity Act would protect Franchisees who want to sell their Franchise and pass the Franchise onto their heirs from the contractual restrictions that many Franchisor’s attempt to place on their Franchisees in the Franchise Agreement.  Additionally, the Act would provide that any disputes between Florida Franchisees and their Franchisor would have to take place in Florida courts using Florida law, regardless of the provisions in the Franchise Agreement.  The Act would also prevent Franchisor’s from terminating a Florida Franchisee’s Franchise Agreement without “good cause”, which would include the Franchisee being convicted of a felony or the Franchisee’s assets being turned over to one or more creditors.

Needless to say, the Florida Small Business Parity Act is being strongly opposed by many Franchisors such as McDonald’s and organizations such as the Florida Retail Federation and the Florida Restaurant and Lodging Association.  They argue that Franchisees are not forced to sign the Franchise Agreement and that any Franchisee can negotiate the Franchise Agreement or walk away from it.  They argue that the Act is unnecessary and overreaching.  These groups argue that strong Franchise Agreements hold all Franchisees to a tough standard which benefits all Franchisees.

Proponents argue that the Act is intended to prevent the Franchise Systems that do not act fairly in their treatment of their Franchisees and may terminate a Franchisee simply to resell the territory to get another Franchise fee or to take over a successful territory for itself.  The law makers contend that fair and honest Franchise systems have nothing to worry about.  The intent of the Act is to ensure that a Franchisee’s investment is protected.

Ultimately, the Bill barely passed the Senate, with a vote of 5-4.  The Bill now moves on to the Judiciary Committee and, if successful, to the Rules Committee.  The Florida House version of the Bill (HB 1219) has not yet been heard in committee.