Fair Franchise Practices Bill: Covenants Not to Compete

(UnhappyFranchisee.Com) Proposed PA House Bill 1620 (Fair Franchise Practices Bill) states that “a franchisor may not enter into a contract to prohibit the franchisee from engaging in business at a location after the franchise expires or is terminated…”

It states:

§ 910. Covenants not to compete.

(a) Prohibition.–Except as set forth in this section, a franchisor may not enter into a contract to prohibit the franchisee from engaging in business at a location after the franchise expires or is terminated under section 916 (relating to termination).

(b) Purchase of assets.–

(1) This section shall not apply if the franchisor, at least 30 days before the effective date of expiration or termination under section 916 pursuant to a written offer, purchases the assets of the franchised business for its fair market value as a going concern. The fair market value of the business must be:

(i) ascertained by an impartial appraiser acceptable to both parties; and

(ii) determined as if the business were to be resold or renewed for a period of years equal to the contract term being offered by the franchisor for new or renewed franchisees.

(2) Forgiveness of debt shall not be considered a purchase of assets.

(3) Upon nonrenewal under section 915(b)(2)(iii) (relating to renewal), a covenant under this paragraph shall be void.

(c) Protection of business of franchisor.–This section shall not apply to a franchise contract obligating a franchisee, after expiration, termination or transfer of a franchise, to do any of the following:

(1) Cease using any trademark, trade secret or other intellectual property owned by the franchisor or its affiliate.

(2) Alter the appearance of the premises and the manner of  operation of the franchise business to avoid any likelihood of confusion as to the affiliation of the business with its former franchisor.

What do you think of the Covenants Not to Compete provision of the proposed PA House Bill 1620 (Fair Franchise Practices Bill)?

Do you believe that making this provision law will be good for franchising?

Why or why not?  Please share a comment below.

Go back to the main page:  PA’s Responsible Franchise Practices Bill: Overview and Discussion

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TAGS: Covenants Not to Compete, franchise legislation, PA House Bill 1620, PA Responsible Franchise Practices Bill, Fair Franchising Legislation, Franchise laws, Pennsylvania State Rep. Peter Daley

One thought on “Fair Franchise Practices Bill: Covenants Not to Compete

  • November 18, 2013 at 9:15 am
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    Every one of these Fair Franchise practices bills has already been violated by Liberty Tax Service. Wonder if these bills were written in response to their deceptive and vindictive practices???

    I so wish these bills were around when I was a franchisee with Liberty Tax Service, the absolute worst franchise to get involved with. You lose, your shirt, your money, your dignity, and if you’re still standing upright after the 5 year contract, run, don’t walk, run the other way and get the hell of out town as soon as humanly possible.

    THEY should be held accountable for their bullying practices……..they are the scum of the earth.

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