Massachusetts Fair Franchise Act public hearing this week

In a year that has seen efforts in several states to impose additional restrictions upon franchisors, Massachusetts will close out 2013 with a hearing on its pending franchise legislation, the “Fair Franchise Act.”  In addition to the common themes in most state franchise laws (limitations on termination and non-renewal, opportunities to cure, notice provisions, etc.) the Massachusetts legislation provides this gem;

“A franchisee may terminate a franchise agreement for good cause shown, without penalty or fees.  Good cause shall include but not be limited to changes to the franchise system or the competitive circumstances of the franchise agreement created or expressly required by franchisor which would cause substantial negative impact or substantial financial hardship in the operation of its franchise.”

If the Massachusetts legislature wants to give trial attorneys in their Commonwealth a Christmas present, this is it…  A good franchise lawyer could take those two sentences and tie franchisors in knots for the foreseeable future.  If Massachusetts wants to impose a 90 day notice period prior to termination or non-renewal – fine; want to prohibit liquidated damage fees in excess of a six month multiplier? Great.  But please do not create legislation that is going to tee up frivolous lawsuit after lawsuit for years to come.  That is not “Fair” for anyone.

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Filed under Franchise Insight, Franchise Law

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