than 50 percent of the franchise would be owned by 
persons who objectively meet the franchisor’s reason-
able current qualifications, the franchisor may refuse 
to authorize the transfer. 
(5) A grant or retention of a security interest 
in the franchised business or its assets, or an owner-
ship interest in the franchisee, if the security agree-
ment establishes an obligation on the part of the se-
cured party enforceable by the franchisor to give the 
franchisor, simultaneously with notice to the 
franchisee, notice of the secured party’s intent to 
foreclose on the collateral, and a reasonable oppor-
tunity to redeem the interest of the secured party 
and recover the secured party’s interest in the fran-
chise or franchised business by satisfying the se-
cured obligation. 
(6) A franchisor may not exercise any pur-
ported right of first refusal or right to purchase with 
regard to any franchise, or interest or assets of a 
franchisee, upon the happening of any event de-
scribed in paragraphs (1) through (5). 
(j) CERTAIN COVENANTS UNENFORCEABLE.—After 
the transfer of a transferor’s complete interest in a fran-
chise, a franchisor may not enforce against the transferor 
any covenant of the franchise agreement purporting to 
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prohibit the transferor from engaging in any lawful occu-
pation or enterprise. This subsection shall not limit the 
franchisor from enforcing a contractual covenant against 
the transferor not to exploit the franchisor’s trade secrets 
or intellectual property rights (including protection of 
trade dress) except by agreement with the franchisor. 
SEC. 7. RENEWAL OF THE FRANCHISE; NOTICE. 
(a) IN GENERAL.—A franchisor shall not, directly or 
through an officer, agent, or employee, fail to renew a 
franchise, except for good cause shown. 
(b) FEES.—Renewals shall not be subject to unrea-
sonable fees. Fees shall not be deemed unreasonable if 
they do not exceed 50 percent of the amount of the aver-
age initial franchise fee or other required payments then 
being charged to all franchisees. 
(c) GOOD CAUSE FOR NONRENEWAL.—Good cause 
as described in subsection (a) shall be based upon legiti-
mate business reason which shall include, the franchisee’s 
refusal or failure to substantially comply with any mate-
rial, reasonable and reasonably necessary express obliga-
tion of the franchise agreement within the 1-year period 
prior to renewal, including repeated and intentional non-
payment of royalties, advertising or marketing fees clearly 
required by the franchise agreement. 
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(d) NOTICE OF NONRENEWAL.—Before nonrenewal 
of the franchise, the franchisor shall give the franchisee 
written notice at least 90 days in advance of the non-
renewal. The notice shall state all of the reasons consti-
tuting good cause for the nonrenewal and shall provide 
that the franchisee has 60 days in which to rectify any 
claimed discrepancy and reinstate its right to renew the 
franchise. 
(e) PRESERVATION OF FEES.—If the franchisor re-
quires the franchisee to sign a new franchise agreement 
as a condition of renewal, such franchise agreement shall 
contain the same royalties, advertising fees, and other fees 
as the expiring agreement, no new fees and any protected 
territory in the expiring agreement shall be the same in 
the renewal franchise. 
(f) PROHIBITED ACTIONS.—A franchisor shall not 
prohibit, or enforce a prohibition against, any franchisee 
from— 
(1) engaging in any business at any location 
after expiration of a franchise agreement; or 
(2) using the customer list and telephone num-
bers associated with the franchise business. 
(g) RULE OF CONSTRUCTION.—Nothing in this sub-
section shall be interpreted to prohibit enforcement of any 
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provision of a franchise contract obligating a franchisee 
after expiration or termination of a franchise— 
(1) to cease or refrain from using a trademark, 
other trade secret, or other intellectual property 
owned by the franchisor or its affiliate; 
(2) to alter the appearance of the business 
premises so that it is not substantially similar to the 
standard design, decor criteria, trade dress or motif 
in use by other franchisees using the same name or 
trademarks within the proximate trade or market 
area of the business; or 
(3) to modify the manner or mode of business 
operations so as to avoid any substantial confusion 
with the manner or mode of operations which are 
unique to the franchisor and commonly in practice 
by other franchisees using the same name or trade-
marks within the proximate trade or market area of 
the business. 
SEC. 8. TERMINATION; GOOD CAUSE; NOTICE; OPPOR-
TUNITY TO CURE. 
(a) IN GENERAL.—A franchisor shall not, directly or 
through an officer, agent, or employee, terminate or cancel 
a franchise, or substantially change the competitive cir-
cumstances of the franchisee, except for good cause 
shown. 
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(b) DEFAULT PROVISIONS.—A default under one 
franchise agreement shall not in and of itself constitute 
a default under another franchise agreement to which the 
franchisee or an affiliate of the franchisee is a party. Any 
cross-default provisions are null and void. 
(c) NOTICE.—Prior to termination or cancellation of 
the franchise, the franchisor shall give the franchisee writ-
ten notice at least 90 days in advance of the termination. 
The notice shall state all of the reasons constituting good 
cause for termination or cancellation and shall provide 
that the franchisee has 60 days in which to rectify any 
claimed defaults. 
(d) EXCEPTION TO NOTICE REQUIREMENT.—The re-
quirement for 90 days advance written notice for termi-
nation shall not apply if the reason for termination is be-
cause— 
(1) the alleged grounds are voluntary abandon-
ment by the franchisee of the franchise relationship, 
in which event, such notice may be given 15 days in 
advance of the termination or cancellation; or 
(2) the conviction of the franchisee in a court 
of competent jurisdiction of an offense, where the 
conviction is no longer appealable and the offense 
is— 
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