73R9226 LJD-F
By Haley, Parker S.B. No. 195
Substitute the following for S.B. No. 195:
By Rudd C.S.S.B. No. 195
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to franchise agreements for fast food restaurants.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Title 2, Business & Commerce Code, is amended by
1-5 adding Chapter 20 to read as follows:
1-6 CHAPTER 20. FAST FOOD RESTAURANT FRANCHISES
1-7 Sec. 20.01. PURPOSE. The purpose of this chapter is to
1-8 promote the public's interest in the fair, efficient, and
1-9 competitive franchising of the fast food restaurant business within
1-10 this state by establishing minimum standards of conduct in the
1-11 franchise relationships.
1-12 Sec. 20.02. DEFINITIONS. In this chapter:
1-13 (1) "Dispute resolution organization" has the meaning
1-14 assigned by Section 154.001, Civil Practice and Remedies Code.
1-15 (2) "Fast food restaurant" means a restaurant where
1-16 food and beverages are sold for consumption on or off the premises
1-17 and delivered to the customer after the customer places an order
1-18 with a cashier at a counter or drive-through window or by
1-19 telephone. The term does not include:
1-20 (A) a restaurant where a majority of the
1-21 customers are seated at tables before a person waiting on the
1-22 tables takes their orders;
1-23 (B) a cafeteria; or
1-24 (C) a store generally considered to be a grocery
2-1 market, supermarket, convenience store, superette, or similar
2-2 retail store.
2-3 (3) "Franchise" means a written agreement that:
2-4 (A) grants the right to distribute goods or
2-5 provide services under a marketing plan prescribed or suggested in
2-6 substantial part by the franchisor;
2-7 (B) requires payment, directly or indirectly, of
2-8 a franchise fee to a franchisor or its affiliate; and
2-9 (C) allows the franchise business to be
2-10 substantially associated with the franchisor's trademark, service
2-11 mark, trade name, logotype, advertisement, or other commercial
2-12 symbol of or designating the franchisor or its affiliate.
2-13 Sec. 20.03. DUTY OF GOOD FAITH. (a) Each fast food
2-14 restaurant franchise includes an implied duty of good faith in its
2-15 performance and enforcement. "Good faith" means honesty in fact
2-16 and the observance of reasonable commercial and ethical standards
2-17 of fair dealing in the trade. The exercise of rights and the
2-18 performance of obligations in the manner expressly authorized or
2-19 contemplated by a franchise is not a breach of this chapter.
2-20 (b) This section applies only to conduct under the
2-21 contractual provisions of a franchise and to a dispute based on a
2-22 claim of encroachment, unreasonable denial of a franchisee's right
2-23 of transfer, or unjust termination or nonrenewal of a franchise.
2-24 Sec. 20.04. RIGHT OF FREE ASSOCIATION. A fast food
2-25 restaurant franchisor may not:
2-26 (1) restrict or inhibit or attempt to restrict or
2-27 inhibit, directly or indirectly, the right of a fast food
3-1 restaurant franchisee to seek legislative redress or to freely
3-2 associate with other fast food restaurant franchisees for any
3-3 lawful purpose; or
3-4 (2) retaliate against a fast food restaurant
3-5 franchisee for seeking legislative redress or participating in a
3-6 trade association for a lawful purpose.
3-7 Sec. 20.05. CHOICE OF LAW. Notwithstanding any condition,
3-8 stipulation, or provision of a franchise to the contrary, this
3-9 chapter applies in all actions and proceedings concerning a fast
3-10 food restaurant franchise for which the franchisee's business is
3-11 located in this state.
3-12 Sec. 20.06. ALTERNATIVE DISPUTE RESOLUTION PROCESS REQUIRED.
3-13 (a) If a fast food restaurant franchisor or franchisee violates
3-14 this chapter, before seeking judicial or other remedies, the
3-15 aggrieved party must seek resolution of the dispute through a
3-16 dispute resolution organization or a nonjudicial and informally
3-17 conducted forum for the voluntary settlement of citizens' disputes
3-18 through the intervention of an impartial third party, including
3-19 alternative dispute resolution procedures described by Chapter 154,
3-20 Civil Practice and Remedies Code.
3-21 (b) The alternative dispute resolution process is
3-22 nonbinding.
3-23 (c) The alternative dispute resolution method shall be fair
3-24 and impartial.
3-25 (d) Both parties to the dispute shall cooperate fully with
3-26 the dispute resolution organization, impartial third party, or
3-27 forum.
4-1 (e) Notwithstanding Subsection (a) of this section, before
4-2 or during the alternative dispute resolution process, either party
4-3 may seek a preliminary injunction or other provisional judicial
4-4 relief if, in its sole judgment, the action is necessary to avoid
4-5 irreparable damage or preserve the status quo. Despite a judicial
4-6 action under this subsection the parties shall continue to
4-7 participate in good faith in the alternative dispute resolution
4-8 procedure required by this section.
4-9 (f) The rules of evidence of this state and the federal
4-10 rules of evidence apply to the alternative dispute resolution
4-11 procedure and evidence admissible in that procedure is admissible
4-12 in a subsequent court or administrative proceeding.
4-13 (g) Unless the parties agree otherwise, the alternative
4-14 dispute resolution procedure is considered to terminate without a
4-15 resolution if:
4-16 (1) at the end of the 60th business day after the date
4-17 of the commencement of the alternative dispute resolution process,
4-18 the parties have not agreed to a written resolution of the dispute
4-19 and a party has given written notice to the dispute resolution
4-20 organization, forum, or impartial third party conducting the
4-21 alternative dispute resolution process of its intention to
4-22 withdraw; or
4-23 (2) the dispute resolution organization, forum, or
4-24 impartial third party conducting the alternative dispute resolution
4-25 process determines that further efforts would not be useful.
4-26 (h) The costs associated with the alternative dispute
4-27 resolution procedure shall be borne equally by each party.
5-1 Sec. 20.07. ARBITRATION OR CIVIL ACTION. (a) If following
5-2 an alternative dispute resolution procedure described by Section
5-3 20.06 of this chapter the dispute remains unsettled, the aggrieved
5-4 party is entitled to have the dispute resolved through binding
5-5 arbitration or may maintain a civil action in a court in the county
5-6 in which the franchisee's franchised outlet is located. If the
5-7 franchisee has outlets in more than one county, the action must be
5-8 brought in the county in which the outlet relating to the violation
5-9 or disagreement is located.
5-10 (b) On a motion by the aggrieved party in a suit filed under
5-11 this section, the court shall order the parties to submit to
5-12 arbitration and shall appoint an impartial third party to conduct
5-13 the arbitration. The impartial third party is appointed by the
5-14 court and serves as provided by Subchapter C, Chapter 154, Civil
5-15 Practice and Remedies Code.
5-16 (c) Each party or counsel for the party may present the
5-17 position of the party before the impartial third party, who must
5-18 render a specific arbitration award resolving the complaint.
5-19 (d) An arbitration award is binding and enforceable in the
5-20 same manner as a contract obligation if:
5-21 (1) in a motion filed under Subsection (b) of this
5-22 section, the aggrieved party stipulates that the award is to be
5-23 binding on all the parties; or
5-24 (2) before the rendition of the award, the parties
5-25 agree to be bound.
5-26 (e) An arbitration award may include any remedy or relief
5-27 that a court could order under this chapter.
6-1 (f) If the franchisor or franchisee violates this chapter
6-2 and the matter is not submitted to binding arbitration, the
6-3 aggrieved party may maintain an action for actual damages and other
6-4 appropriate relief, including costs and attorney's fees.
6-5 SECTION 2. The importance of this legislation and the
6-6 crowded condition of the calendars in both houses create an
6-7 emergency and an imperative public necessity that the
6-8 constitutional rule requiring bills to be read on three several
6-9 days in each house be suspended, and this rule is hereby suspended,
6-10 and that this Act take effect and be in force from and after its
6-11 passage, and it is so enacted.