(A) punishable by a term of imprisonment 
in excess of 1 year; 
(B) directly related to the business conduct 
pursuant to the franchise; or 
(C) materially impairs the goodwill value of 
the franchise or the franchised trademark. In 
that event, such notice may be given at any 
time following the date on which the conviction 
is no longer appealable and shall be effective 
upon delivery and written receipt of the notice. 
In no event shall any franchisor collect any fi-
nancial penalty or fee, however delineated, as a 
consequence of such conviction. 
(e) ADDITIONAL NOTICE.—If the reason for termi-
nation or cancellation is nonpayment of sums due under 
the franchise agreement, the franchisee shall be entitled 
to written notice of such default, and shall have 15 days 
in which to cure such default from the date of such notice. 
For such nonpayment defaults a franchisee has the right 
to cure 3 times in any 12-month period during the period 
of the franchise agreement. 
(f) NOTICE OF IMMINENT DANGER.—If the reason 
for termination or cancellation is violation of any law or 
regulation relating to an imminent danger to public health 
or safety the franchisee shall be entitled to immediate 
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written notice and shall have 24 hours following receipt 
of such notice to cure such violation. 
(g) GOOD CAUSE.—A franchisee may terminate a 
franchise agreement for good cause shown, without any 
further liability to the franchisor. Good cause shall include 
changes to the franchise system or the competitive cir-
cumstances of the franchise business, which would cause 
substantial negative impact or substantial financial hard-
ship to the franchisee in the operation of its franchise. 
SEC. 9. EFFECT OF TERMINATION. 
(a) IN GENERAL.—Upon termination of a franchise 
for whatever cause or reason, except voluntary relinquish-
ment or abandonment of the franchise by the franchisee 
or the expiration of the franchise agreement where the 
franchisee does not elect to renew, the franchisor shall 
fairly compensate the franchisee or franchisee’s estate for 
the fair market value at the time of termination of the 
franchise, of the franchisee’s inventory, supplies, equip-
ment, and furnishings purchased by the franchisee from 
the franchisor or its approved sources and the fair market 
value of the going concern value and good will of the busi-
ness, if any, exclusive of personalized items which have 
no value to the franchisor and inventory, supplies, equip-
ment, and furnishings not reasonably required in the con-
duct of the franchise business; provided, however, that— 
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(1) compensation need not be made to 
franchisee of going concern value and good will if 
the franchisor agrees in writing not to enforce a cov-
enant which restrains the franchisee from competing 
with the franchisor in the same or substantially 
similar business in the same or substantially similar 
manner at the same location using the same prop-
erty except the franchisor’s registered trademark or 
trade name; and 
(2) a franchisor may offset against amounts 
owed to a franchisee under this subsection any 
amount mutual agreed upon and owed by the 
franchisee to franchisor which is not the subject of 
a good faith dispute by the franchisee. 
(b) RULE OF CONSTRUCTION.—The provisions of this 
section shall not be construed to permit the termination 
or nonrenewal of any franchise agreement except in ac-
cordance with the express terms of the franchise agree-
ment and this Act. 
SEC. 10. TRANSFER OF FRANCHISE BY FRANCHISOR. 
A franchisor shall not transfer, by sale or otherwise, 
its interest in a franchise system unless— 
(1) the franchisor provides, not less than 30 
days before the effective date of transfer, notice to 
every franchisee of the intent to transfer the 
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franchisor’s interest in the franchise or of substan-
tially all of the franchises held by the franchisor; 
(2) such notice is accompanied by a complete 
description of the business and financial terms of 
the proposed transfer or transfers; and 
(3) upon the transfer, the entity assuming the 
franchisor’s obligations has the business experience 
and financial means to adequately perform all of the 
franchisor’s obligations in the ordinary course of 
business. 
SEC. 11. PRIVATE RIGHT OF ACTION. 
(a) IN GENERAL.—A franchisee who is injured by a 
violation or threatened violation of this Act, or of section 
436.1 of title 16, Code of Federal Regulations (relating 
to disclosure requirements and prohibitions concerning 
franchising and business opportunity ventures), as in ef-
fect on the date of the enactment of this Act, may bring 
a private right of action in any court of appropriate juris-
diction for rescission and restitution, as well as for all 
damages and maybe awarded injunctive relief against a 
violation or threatened violation of this Act or such sec-
tion. The franchisee shall also be entitled to recover its 
costs of litigation and reasonable attorney’s fees and ex-
pert witness fees, against any entity or person found to 
be liable for such violation. 
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(b) LIABILITY.—Every person who directly or indi-
rectly controls a person liable under subsection (a), every 
partner in a firm so liable, every principal executive officer 
or director of a corporation so liable, every person occu-
pying a similar status or performing similar functions and 
every employee of a person so liable who materially aids 
in the act or transaction constituting the violation is also 
liable jointly and severally with and to the same extent 
as such person, unless the person who would otherwise be 
liable hereunder had no knowledge of or reasonable 
grounds to know of the existence of the facts by reason 
of which the liability is alleged to exist. 
(c) STATUTE OF LIMITATIONS.—No action may be 
commenced pursuant to this section or this Act more than 
the later of— 
(1) 5 years after the date on which the violation 
occurs; or 
(2) 3 years after the date on which the violation 
is discovered or should have been discovered through 
exercise of reasonable diligence. 
(d) VENUE.—A franchisee may commence a civil ac-
tion to enforce any provision of this Act within the juris-
diction wherein the applicable franchisee is a resident or 
where the applicable business is located. 
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(e) CUMULATIVE RIGHT.—The private rights pro-
vided for in this section are in addition to and not in lieu 
of other rights or remedies created by Federal or State 
law. 
SEC. 12. SCOPE AND APPLICABILITY. 
(a) PROSPECTIVE APPLICATION.—Except as pro-
vided in subsection (b), the requirements of this Act shall 
apply to franchise agreements entered into, amended, ex-
changed, transferred, assigned, or renewed after the date 
of enactment of this Act. 
(b) DELAYED EFFECT.—The requirements of section 
3 of this Act shall take effect 90 days after the date of 
enactment of this Act and shall apply only to actions, 
practices, disclosures, and statements occurring on or 
after such date. 
SEC. 13. DEFINITIONS. 
For purposes of this Act, the following definitions 
apply: 
(1) The term ‘‘affiliate’’ has the meaning given 
the term ‘‘affiliated person’’ in section 436.1(b) of 
title 16 of the Code of Federal Regulations as in ef-
fect on July 1, 2007. 
(2) The term ‘‘disclosure document’’ means ei-
ther the disclosure statement required by the Fed-
eral Trade Commission in Trade Regulation Rule 
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436 (16 C.F.R. 436) as amended from time to time, 
or any offering format allowed or required by State 
or local law. 
(3) The term ‘‘franchise’’ has the meaning 
given such term in section 436.1(h) of title 16 of the 
Code of Federal Regulations as in effect on July 1, 
2007, but does not include any contract otherwise 
regulated by the Federal Petroleum Marketing Prac-
tices Act (15 U.S.C. 2801 et seq.) except as to fran-
chise relationships that do not involve the sale of pe-
troleum products. 
(4) The term ‘‘franchise seller’’ has the mean-
ing given such term in section 436.1(j) of title 16 
of the Code of Federal Regulations as in effect on 
July 1, 2007. 
(5) The term ‘‘franchisee’’ has the meaning 
given such term in section 436.1(i) of title 16 of the 
Code of Federal Regulations as in effect on July 1, 
2007. 
(6) The term ‘‘franchisor’’ has the meaning 
given such term in section 436.1(k) of title 16 of the 
Code of Federal Regulations as in effect on July 1, 
2007. 
(7) The terms ‘‘material’’ and ‘‘material fact’’ 
include— 
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(A) any fact, circumstance, or set of condi-
tions which a reasonable franchisee or a reason-
able prospective franchisee would consider im-
portant in making a significant decision relat-
ing to entering into, remaining in, or aban-
doning a franchise relationship; and 
(B) any fact, circumstance, or set of condi-
tions which has, or may have, any significant fi-
nancial impact on a franchisor, franchisee, or a 
prospective franchisee. 
(8) The term ‘‘offer’’ or ‘‘offering’’ means any 
effort to offer or to dispose of, or solicitation of an 
offer to buy, a franchise or interest in a franchise 
for value. 
(9) The term ‘‘outlet’’ means a point of sale, 
temporary or permanent, fixed or mobile, from 
which goods or services are offered for sale. 
(10) The term ‘‘person’’ means either an indi-
vidual or any other legal or commercial entity. 
(11) The term ‘‘State’’ means a State, the Dis-
trict of Columbia, and any territory or possession of 
the United States. 
(12) The term ‘‘subfranchise’’ means a contract 
or an agreement by which a person pays a 
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franchisor for the right to sell, negotiate the sale, or 
provide service franchises. 
(13) The term ‘‘subfranchisor’’ means a person 
who is granted a subfranchise. 
(14) The term ‘‘trade secret’’ means informa-
tion, including a formula, pattern, compilation, pro-
gram, device, method, technique, or process, that— 
(A) derives independent economic value, 
actual or potential, from not being generally 
known to, and not being readily ascertainable 
by proper means by, other persons who can ob-
tain economic value from its disclosure or use; 
and 
(B) is the subject of efforts that are rea-
sonable under the circumstances to maintain its 
secrecy. 
(15) The terms ‘‘nonrenewal’’ and ‘‘nonrenew’’ 
mean that the franchisor fails or refuses to extend 
the franchisor-franchisee relationship at the end of 
the existing term of the franchise agreement, irre-
spective of whether the franchise agreement contains 
any contractual right to obtain a renewal term. Al-
lowing a franchise agreement with no renewal term 
to expire shall be considered to be a ‘‘nonrenewal’’ 
for purposes of this Act. 
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SEC. 14. SEVERABILITY. 
If any provision or clause of this section or any appli-
cation of this section to any person or circumstances is 
held invalid, such invalidity shall not affect other provi-
sions or applications of the section which can be given ef-
fect without the invalid provision or application, and to 
this end the provisions of this section are declared to be 
severable. 
SEC. 15. STATE ATTORNEYS GENERAL. 
(a) CIVIL ACTION.—Whenever an attorney general 
(or similar enforcement officer of a State, however de-
nominated, hereinafter ‘‘attorney general’’) of any State 
has reason to believe that the interests of the residents 
of that State have been or are being threatened or ad-
versely affected because any person has engaged or is en-
gaging in a pattern or practice which violates any provi-
sion of this Act, the State, as parens patriae, may bring 
a civil action on behalf of its residents in an appropriate 
State court or district court of the United States to enjoin 
such violations, to obtain damages, restitution or other 
compensation on behalf of residents of such State or to 
obtain such further and other relief as the court may deem 
appropriate. 
(b) PRESERVATION
OF POWER.—For purposes of 
bringing any civil action under subsection (a), nothing in 
this Act shall prevent an attorney general from exercising 
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the powers conferred on the attorney general by the laws 
of such State to conduct investigations or to administer 
oaths or affirmations or to compel the attendance of wit-
nesses or the production of documentary and other evi-
dence. 
(c) VENUE.—Any civil action brought under sub-
section (a) in a district court of the United States may 
be brought in the district in which the defendant is found, 
is an inhabitant, or transacts business, or wherever venue 
is proper under section 1391 of title 28, United States 
Code. Process in such action may be served in any district 
in which the defendant is an inhabitant or in which the 
defendant may be found. 
(d) NO PREEMPTION.—Nothing contained in this 
section shall prohibit an authorized State official from pro-
ceeding in State court on the basis of an alleged violation 
of any civil or criminal statute of such State. 
Æ 
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