By: Haley, Parker S.B. No. 195
A BILL TO BE ENTITLED
AN ACT
1-1 relating to franchise agreements for fast food restaurants.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Title 2, Business & Commerce Code, is amended by
1-4 adding Chapter 20 to read as follows:
1-5 CHAPTER 20. FAST FOOD RESTAURANT FRANCHISES
1-6 Sec. 20.01. PURPOSE. The purpose of this chapter is to
1-7 promote the public's interest in the fair, efficient, and
1-8 competitive franchising of the fast food restaurant business within
1-9 this state by establishing minimum standards of conduct in such
1-10 franchise relationships.
1-11 Sec. 20.02. DEFINITIONS. In this chapter:
1-12 (1) "Fast food restaurant" means a restaurant where
1-13 food and beverages are sold for consumption on or off the premises
1-14 and delivered to the customer after the customer places an order
1-15 with a cashier at a counter or drive-through window or by
1-16 telephone. The term does not include a restaurant where a majority
1-17 of the customers are seated at tables before a person waiting on
1-18 the tables takes their orders, nor does the term include cafeterias
1-19 or stores generally considered to be grocery markets, supermarkets,
1-20 convenience stores, superettes, or similar retail stores.
1-21 (2) "Franchise" means a written agreement which
1-22 provides all of the following:
1-23 (A) grants the right to distribute goods or
2-1 provide services under a marketing plan prescribed or suggested in
2-2 substantial part by the franchisor;
2-3 (B) requires payment, directly or indirectly, of
2-4 a franchise fee to a franchisor or its affiliate; and
2-5 (C) allows the franchise business to be
2-6 substantially associated with the franchisor's trademark, service
2-7 mark, trade name, logotype, advertisement, or other commercial
2-8 symbol of or commercial symbol designating the franchisor or its
2-9 affiliate.
2-10 Sec. 20.03. DUTY OF GOOD FAITH. Each fast food restaurant
2-11 franchise includes an implied duty of good faith in its performance
2-12 and enforcement. "Good faith" means honesty in fact, the
2-13 observance of reasonable commercial and ethical standards of fair
2-14 dealing in the trade, faithfulness to an agreed common purpose, and
2-15 consistency with the justified expectations of the parties to the
2-16 franchise agreement. The duty of good faith obligates a party to a
2-17 fast food restaurant franchise, in making a decision that directly
2-18 affects the fast food restaurant franchise or the business
2-19 conducted under the fast food restaurant franchise, to refrain from
2-20 conduct that impairs or injures the right of another party to the
2-21 franchise agreement to receive the reasonably anticipated benefits
2-22 of the fast food restaurant franchise. The exercise of rights and
2-23 the performance of obligations in the manner expressly authorized
2-24 or contemplated by a franchise agreement shall not be a breach of
2-25 this Act.
3-1 Sec. 20.04. RIGHT OF FREE ASSOCIATION. A fast food
3-2 restaurant franchisor shall not:
3-3 (1) restrict or inhibit or attempt to restrict or
3-4 inhibit, directly or indirectly, the right of a fast food
3-5 restaurant franchisee to seek legislative redress or to freely
3-6 associate with other fast food restaurant franchisees for any
3-7 lawful purpose; or
3-8 (2) retaliate against a fast food restaurant
3-9 franchisee for seeking legislative redress or participating in a
3-10 trade association for a lawful purpose.
3-11 Sec. 20.05. CHOICE OF LAW. Notwithstanding any condition,
3-12 stipulation, or provision of a franchise agreement to the contrary,
3-13 the provisions of this Act apply in all actions and proceedings
3-14 concerning a fast food restaurant franchise for which the
3-15 franchisee's business is located in this state.
3-16 Sec. 20.06. JUDICIAL REMEDIES. (a) If a fast food
3-17 franchisor or franchisee violates this chapter, the aggrieved party
3-18 may maintain a civil action in a court in the county in which the
3-19 franchisee's franchised outlet is located. If the franchisee has
3-20 outlets in more than one county, the action must be brought in the
3-21 county in which the outlet relating to the violation or
3-22 disagreement is located.
3-23 (b) The aggrieved party may maintain an action under
3-24 Subsection (a) of this section for actual damages and other
3-25 appropriate relief, including costs and attorney fees. In
4-1 addition, exemplary damages not to exceed four times actual damages
4-2 may be recovered where a violation of this chapter is shown to have
4-3 been committed with malice.
4-4 (c) For purposes of this chapter, "malice" means conduct
4-5 that is intended by the defendant to cause substantial harm to the
4-6 aggrieved party.
4-7 SECTION 2. The importance of this legislation and the
4-8 crowded condition of the calendars in both houses create an
4-9 emergency and an imperative public necessity that the
4-10 constitutional rule requiring bills to be read on three several
4-11 days in each house be suspended, and this rule is hereby suspended,
4-12 and that this Act take effect and be in force from and after its
4-13 passage, and it is so enacted.