The Small Business Franchise Act

Originally introduced in 1998 and passed in 1999, the Small Business Franchise Act (SBFA) is put in place certain safeguards to eliminate fraud and other activities that might exploit franchisee investors. Believes that the common opinion SBFA was introduced in order to give greater bargaining power of franchisees against franchisors.

Michigan Congressman John Conyers, Jr. said that "Protecting the rights of dealers is ultimately to protect the rights of small businesses."

The proof is in the details:

1) The bill reinforces existing prohibitions. The SBFA is a reminder that the fraud perpetuated in the franchise relationship is prohibited.

2) The bill mandates good behavior and belief. Unsurprisingly, not everyone follows the rules of the world of franchising. The SBFA overlooking small affiliates, requiring all parties to act honestly with each other and meet reasonable standards of fair dealing in the field.

3) The bill encourages affiliates to form associations. The SBFA clearly states that companies can not prevent franchisees to create or join associations. (It 'a fact, membership in professional organizations is helpful, and can improve their knowledge of the world of franchising).
4) The bill protects the franchise from unfair termination. A mandatory 30 days must be given to the franchisee to cure any defaults, among other benefits.

5) The bill promotes the free exchange of message franchise agreement expires. Upon expiration of the franchise, a former affiliate is authorized to engage in business anywhere, but it is forbidden to use the franchisor's trademark, intellectual property or trade secrets.

6) The law protects franchisees against the illicit transfer of the business. The affiliates are particularly vulnerable to illicit transfers because of the prevalence of mergers, leveraged buyouts and acquisitions. According SBFA, franchisees must be given 30 days' notice of transfer of ownership of the franchise to another entity.

7) The bill gives a possible attorney general to intervene if necessary. If a state attorney general belief that the interests of the State have been or are harmed or threatened because of activities that violate the franchisor SBFA, the Attorney General is authorized to bring a civil action on behalf of its inhabitants in a district court. In other words, the highest official of the State Prosecutor can make sure that the SBFA is not violated.

8) The bill allows the freedom of franchisees to source goods and services independently. Rather than forcing franchisees to purchase materials from its headquarters in what may be an exorbitant price, the SBFA allows franchisees to purchase goods and services from sources of your choice (given that these materials meet reasonable, stable and uniform level of System quality standards dictated by the franchisor).

9) The bill imposes limited fiduciary duty of the franchisor. When handling the money of the small business owner, the franchisor must provide their members with the highest standard of care. Franchisors are required by SBFA to give members a full disclosure of donations and a full accounting of how money is used.

10) The bill requires procedural fairness. It is illegal for a franchisor to require a term / condition in the franchise agreement that violates the SBFA. This is very important, as it does not allow one to go to limit the benefits inherent in the SBFA .......