I
104TH CONGRESS
1ST SESSION
H. R. 1717
To establish minimum standards of fair conduct in franchise sales and
franchise business relationships, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 25, 1995
Mr. LAFALCE introduced the following bill; which was referred to the
Committee on the Judiciary
A BILL
To establish minimum standards of fair conduct in franchise
sales and franchise business relationships, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Federal Fair Franchise Practices Act’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purpose.
Sec. 3. Franchise sales practices.
Sec. 4. Unfair franchise practices.
Sec. 5. Standards of conduct.
Sec. 6. Franchisee associations.
Sec. 7. Acquisition of franchise systems.
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Sec. 8. Franchisor encroachment.
Sec. 9. Procedural fairness.
Sec. 10. Actions by private persons.
Sec. 11. Actions by state attorneys general.
Sec. 12. Effect on other law.
Sec. 13. Census data on franchise businesses.
Sec. 14. Scope and applicability.
Sec. 15. Definitions.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress makes the following
findings:
(1) Franchise business relationships represent a
large and growing segment of the nation’s retail and
service businesses and are rapidly replacing more
traditional forms of small business ownership in the
American economy.
(2) Franchise relationships involve a joint en-
terprise between the franchisor and franchisees in
which each party has a vested interest in the fran-
chised business.
(3) Most prospective franchisees lack bargain-
ing power and generally invest substantial amounts
to obtain a franchise business when they are unfa-
miliar with operating a business, with the business
being franchised and with industry practices in fran-
chising.
(4) Many franchises reflect a profound imbal-
ance of contractual power in favor of the franchisor,
and fail to give due regard to the legitimate business
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interests of the franchisee, as a result of the
franchisor reserving pervasive contractual rights over
the franchise relationship.
(5) Franchisees may suffer substantial financial
losses when the franchisor does not provide truthful
or complete information regarding the franchise op-
portunity, or where the franchisor does not act in
good faith or with due care in the performance of
the franchise contract.
(6) Traditional common law doctrines have not
evolved sufficiently to protect franchisees adequately
from fraudulent or unfair practices in the sale and
operation of franchise businesses, and significant
contractual and procedural restrictions have denied
franchisees viable legal recourse to protect their in-
terests in such businesses.
(b) PURPOSE.—It is the purpose of this Act to pro-
mote greater fairness and equity in franchise relation-
ships, to protect prospective franchises from fraudulent
sales practices, to establish minimum standards of conduct
in franchise practices, to strengthen private remedies
against fraudulent or unlawful actions, to provide the pub-
lic with more reliable information regarding franchising,
and to provide to consumers the greater benefits which
would flow from more equitable franchise relationships.
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SEC. 3. FRANCHISE SALES PRACTICES.
(a) IN GENERAL.—In connection with the advertis-
ing, offering, licensing, contracting, sale or other pro-
motion in or affecting commerce of any franchise, or any
relationship which is represented either orally or in writing
to be a franchise, it shall be unlawful for any person, part-
nership or corporation—
(1) to employ a device, scheme, or artifice to
defraud;
(2) to engage in an act, practice, course of busi-
ness or pattern of conduct which operates or is in-
tended to operate as a fraud or deceit upon any per-
son;
(3) to obtain money or property, or assist oth-
ers to obtain money or property, by means of any
untrue statement of a material fact, any omission to
state a material fact, or any omission to state a ma-
terial fact necessary in order to make the statements
made, in the light of the circumstances under which
they are made, not misleading; or
(4) 
to 
discriminate 
among 
prospective
franchisees on the basis of race, sex, religion, dis-
ability or national origin—
(A) in the solicitation, offering or sale of
any franchise opportunity, except that, and
then only to the extent that, any discrimination
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between franchisees is reasonable and is related
to a program under which franchises are made
available to a class of persons who may have
been denied franchise opportunities in the past
based on suspect classifications including race,
sex, religion, disability or national origin; or
(B) in the selection of any site or location
for a franchise business; or
(5) to represent or imply in any manner what-
soever that a franchise has been reviewed, endorsed,
recommended or approved by the United States or
any agency or officer thereof.
(b) MISREPRESENTATIONS
IN REQUIRED DISCLO-
SURE.—
(1) In connection with any disclosure document,
notice or report required by law or regulation, it
shall be unlawful for any franchisor, subfranchisor
or franchise broker, either directly or indirectly
through any officer, employee, agent, representative
or attorney—
(A) to make or cause to be made an un-
true statement of material fact, omit to state a
material fact, or omit to state a material fact
necessary in order to make the statements
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made, in the light of the circumstances under
which they are made, not misleading;
(B) to fail to furnish any prospective
franchisee with all information required to be
disclosed and at the time and in the manner re-
quired; and
(C) to make any claim or representation to
a prospective franchisee, whether orally or in
writing, which is inconsistent with or con-
tradicts any information provided to the pro-
spective franchisee in any required disclosure.
(2) For purposes of this subsection, the term
disclosure document means either the disclosure
statement required by the Federal Trade Commis-
sion in Trade Regulation Rule 436 (16 CFR 436)
as it may be amended, or an offering circular pre-
pared in accordance with Uniform Franchise Offer-
ing Circular guidelines as adopted and amended by
the North American Securities Administrators Asso-
ciation, Inc., or its successor.
(c) MISREPRESENTATION OF EARNINGS AND FAIL-
URES.—For purposes of this section, an untrue statement
of material fact shall include any statement of fact which
has the intent or effect of misrepresenting the profitability
of a franchise opportunity, the rate of success of fran-
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chises or franchisees associated with a franchise oppor-
tunity, or the rate of success of franchises generally.
(d) BURDEN OF PROOF.—For purposes of this sec-
tion, the burden of proof shall be on the franchisor to show
that any claim, statement or representation, either made
orally or in writing as part of an advertisement, sales pres-
entation, marketing document or required disclosure in
connection with the offering or sale of a franchise, is accu-
rate and not misleading, and that such claim, statement
or representation had a reasonable basis in fact at the
time it was made.
(e) EFFECTIVE DATE.—The requirements of this sec-
tion shall take effect sixty days after the date of enactment
of this Act and shall apply only to actions, practices, dis-
closures and statements occurring on or after such date.
SEC. 4. UNFAIR FRANCHISE PRACTICES.
(a) DECEPTIVE AND DISCRIMINATORY PRACTICES.—
In connection with the operation of a franchise system or
the performance, enforcement, renewal and termination of
any franchise agreement, or of an agreement for any rela-
tionship which is represented either orally or in writing
to be a franchise, it shall be unlawful for a franchisor or
subfranchisor, either directly or indirectly through any of-
ficer, employee, agent, representative or attorney—
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(1) to engage in an act, practice, course of busi-
ness, or pattern of conduct which operates or is in-
tended to operate as a fraud or deceit upon any per-
son;
(2) to employ unlawful or deceptive acts or
practices in the operation of the franchisor’s enter-
prise or method of business; or
(3) to discriminate among franchisees on the
basis of race, sex, religion, disability or national ori-
gin.
(b) TERMINATION WITHOUT GOOD CAUSE.—
(1) It shall be unlawful for a franchisor or
subfranchisor, either directly or indirectly through
any officer, employee, agent or attorney, to termi-
nate or otherwise cancel a franchise prior to its expi-
ration without good cause for such termination or
cancellation.
(2) For purposes of this subsection, good cause
shall exist only where—
(A) the franchisee fails to comply with a
material provision of the franchise agreement
after notice specifying the default and a thirty-
day period to cure the default, or if the default
can not be cured within thirty days, the
franchisee fails to initiate within thirty days
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and diligently pursue substantial continuing ac-
tion to cure the default;
(B) the franchisee, without the require-
ment of notice and opportunity to cure—
(i) voluntarily abandons the franchise
business, except that loss or termination of
a leasehold for the franchise business prior
to the term of a franchise agreement by
reason of eminent domain, foreclosure sale,
natural disaster or other termination not
the fault of the franchisee shall not be con-
sidered abandonment by the franchisee;
(ii) is convicted of a crime that sub-
stantially impairs the good will associated
with the franchisor’s trade mark, service
mark, trade name, logotype, advertising or
other commercial symbol;
(iii) repeatedly fails to comply with
the same material provision of the fran-
chise agreement, where the enforcement of
such provision is substantially similar to
enforcement of that provision with other
franchisees; or
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(iv) operates the franchised business
in a manner that creates an imminent dan-
ger to public health or safety; and
(C) the franchisor, whether or not as a re-
sult of bankruptcy or reorganization, withdraws
from a marketing area, provided the franchisor
pays the franchisee reasonable compensation for
damages incurred from the shortened term of
the franchise, or agrees not to enforce any con-
tractual prohibition against the franchisee con-
tinuing to engage in the business at the licensed
location, except as provided in subsection (d)(3)
of this section.
(d) MANDATORY SOURCING OF SUPPLIES.—
(1) It shall be unlawful for any franchisor or
subfranchisor, either directly or indirectly through
any officer, employee, agent, representative or attor-
ney, to prohibit a franchisee from obtaining equip-
ment, fixtures, supplies or services sued in the estab-
lishment or operation of the franchised business
from sources of the franchisee’s choosing, except
that such goods or services may be required to meet
uniform system-wide quality standards which are not
arbitrarily 
promulgated 
or 
enforced 
by 
the
franchisor.
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(2) This subsection shall not apply to reason-
able quantities of inventory of goods or services (in-
cluding display and sample items) that the
franchisee is required to obtain from the franchisor
and/or its affiliate(s), where such goods or services
are integrally related to a trademark, trade name,
trade secret or patent owned by or licensed to the
franchisor or its affiliate(s), provided the franchisor
shall not withhold a franchisee’s right to obtain such
goods and services without providing a notice of de-
fault and a thirty-day period to cure the default.
(e) POST-TERM RESTRICTIONS ON COMPETITION.—
(1) A franchisor shall not, either directly or in-
directly through any officer, employee, agent, rep-
resentative or attorney, prohibit, or enforce a prohi-
bition against, any franchisee from engaging in any
business at any location after expiration of a fran-
chise or after termination of the franchise prior to
its expiration for good cause.
(2) This subsection shall not apply to enforce-
ment of any such prohibition where the franchisor,
not less than ten days before the effective date of
such termination or expiration, offers in writing to
purchase the assets of the franchised business for its
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fair market value as a going concern, provided
that—
(A) the fair market value of such business
be determined as if it were to be resold or re-
newed for a period of years equal to the con-
tract term being offered by the franchisor for
new or renewed franchises;
(B) the fair market value of such business
is ascertained by an impartial appraiser, whose
appointment is acceptable to both parties; and
(C) any forgiveness of debt shall not be
considered a purchase of assets by the
franchisor for purposes of this section; and
(3) Nothing in this subsection shall be inter-
preted to prohibit enforcement of any provisions of
a franchise contract obligating a franchisee after ex-
piration or termination of a franchise—
(A) to cease or refrain from using a trade-
mark, trade secret or other intellectual property
owned by the franchisor or its affiliate, except
that the existence of language in the franchise
agreement purporting to determine ownership
of a trademark, trade secret or other intellec-
tual property shall not be binding upon any
court or forum for purposes of this paragraph,
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but may be considered by such court or forum
as evidence of such ownership; or
(B) to alter the appearance of the premises
and the manner of operation of the franchised
business to avoid any likelihood of confusion as
to the affiliation of the business with its former
franchisor.
SEC. 5. STANDARDS OF CONDUCT.
(a) DUTY OF GOOD FAITH.—
(1) A franchise contract imposes on each party
thereto a duty to act in good faith in its perform-
ance and enforcement.
(2) As used in this subsection, a duty of good
faith shall obligate a party to a franchise to do noth-
ing that will have the effect of destroying or injuring
the right of the other party to receive the fruits of
the contract and to do everything required under the
contract to accomplish such purpose.
(b) DUTY OF DUE CARE.—
(1) A franchise relationship imposes on the
franchisor a duty of due care. Unless a franchisor
represents that it has greater skill or knowledge in
its undertaking with its franchisees, or conspicuously
disclaims that it has skill or knowledge, the
franchisor is required to exercise the skill and knowl-
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edge normally possessed by franchisors in good
standing in the same or similar types of business.
(2) For purposes of this subsection—
(A) the phrase ‘‘skill or knowledge’’ means
something more than the mere minimum level
of skill or knowledge required of any person en-
gaging in a service or business and involves a
special level of expertise—
(i) which is the result of acquired
learning and aptitude developed by special
training and experience in the business to
be conducted under the franchise, or the
result of extensive use and experience with
the products or services or the operating
system of the franchise;
(ii) which is the result of experience in
organizing a franchise system and in pro-
viding training, assistance and services to
franchisees; and
(iii) which a prospective franchisee
would expect in reasonable reliance on the
written and oral commitments and rep-
resentations of the franchisor; and
(B) a franchisor shall be permitted to show
that it contracted for, hired or purchased the
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expertise necessary to comply with the require-
ments of this subsection and that such expertise
was incorporated in the franchise or commu-
nicated or provided to the franchisee.
(3) The requirement of this subsection may not
be waived by agreement or by conduct, but the
franchisor may limit in writing the nature and scope
of its skill and knowledge, and of its undertaking
with a prospective franchisee, provided that no in-
consistent representation, whether written or oral, is
made to the prospective franchisee.
(c) LIMITED FIDUCIARY DUTY.—
(1) Without regard to whether a fiduciary duty
is imposed generally on the franchisor by virtue of
a franchise relationship, the franchisor owes a fidu-
ciary duty to its franchisees and is obligated to exer-
cise the highest standard of care for franchisee in-
terests where the franchisor—
(A) undertakes to perform bookkeeping,
collection, payroll or accounting services on be-
half of the franchisee; or
(B) requires franchisees to make contribu-
tions to any pooled advertising or promotional
fund to be administered or supervised by the
franchisor.
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(2) While not limiting the ability of any court
to identify other circumstances for which a fiduciary
duty may also exist, this subsection does not create
or extend a fiduciary duty by implication to other
aspects of a franchise.
SEC. 6. FRANCHISEE ASSOCIATIONS.
(a) RIGHT OF ASSOCIATION.—It shall be unlawful for
any franchisor or subfranchisor, either directly or indi-
rectly through any officer, employee, agent representative
or attorney—
(1) to hinder or prohibit, directly or indirectly,
the free association of franchisees for any lawful
purpose, including the formation of or participation
in any trade association made up of franchisees; and
(2) to discriminate against a franchisee by im-
posing requirements not imposed on other similarly
situated franchisees or otherwise retaliate, directly
or indirectly, against any franchisee for membership
or participation in a franchisee association.
(b) ANTITRUST EXEMPTION.—The Clayton Antitrust
Act (15 U.S.C. 12 et seq.) is amended by adding after
section 27, the following new section:
‘‘ANTITRUST LAWS NOT APPLICABLE TO FRANCHISEE
ASSOCIATIONS
‘‘SEC. 28. Nothing contained in the antitrust laws
shall be construed to prohibit the existence and operation
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of associations of owners of franchise businesses, insti-
tuted for the purposes of mutual help, and not having cap-
ital stock or conducted for profit, or to prohibit or restrain
individual members of such associations from lawfully car-
rying out the legitimate objects thereof; nor shall such as-
sociations, or the members thereof, be held or construed
to be illegal combinations or conspiracies in restraint of
trade, under the antitrust laws.’’.
SEC. 7. ACQUISITION OF FRANCHISE SYSTEMS.
(a) IN GENERAL.—Whenever all or a major portion
of the franchise system is acquired by another person
through purchase, merger, consolidation, acquisition of as-
sets or through the bankruptcy court, any foreclosure or
judicial order, or otherwise, the person acquiring the fran-
chise system shall assume the obligations agreed to by the
predecessor franchisor in contracts with franchisees and
the franchisees shall be entitled to hold such transferee
legally responsible for the duties and responsibilities of the
predecessor franchisor.
(b) MUTUAL RELEASE
OF OBLIGATIONS.—Unless
the person acquiring a franchise system expressly under-
takes such obligations, or acts in good faith to renegotiate
such obligations with franchisees, the franchisees shall be
entitled to reject their contractual duties and responsibil-
ities to the franchisor, including any noncompetition cov-
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enant and post-term obligations, provided that upon such
rejection, the franchisees cease from using the franchisor’s
trademarks, logos and other express identification, and
otherwise 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 the franchise system.
SEC. 8. FRANCHISOR ENCROACHMENT.
(a) IN GENERAL.—A franchisor shall not grant or
license a new franchise, or otherwise establish a new outlet
or one or more points of sale of goods or services similar
to that offered by a franchisee and identified by the same
trade name, trademark, logotype, commercial system or
advertising used by a franchisee in unreasonable proximity
to an outlet or business owned or licensed to such
franchisee so that the effect or probable effect of granting
or establishing such new franchise, outlet or point(s) of
sale is to cause a reduction in gross sales of the existing
franchise.
(b) LIABILITY FOR MONETARY DAMAGES.—Where a
franchisor has granted a new franchise or established a
new outlet or point of sale in such unreasonable proximity
to an existing franchise, the owner of the existing fran-
chise shall have cause of action for monetary damages,
including, but not limited to, actual loss of income result-
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ing from the reduction in gross sales caused by the open-
ing and operation of the new franchise, outlet or point of
sale, anticipated loss of income caused by the continued
operation of such franchise, outlet or point of sale and
costs of litigation and reasonable attorney’s fees.
(c) EXCEPTIONS FROM LIABILITY.—This section
shall not apply where—
(1) the reduction in gross sales for an existing
franchise caused by the opening and operation of the
new franchise, outlet or one or more points of sale,
based on a comparison to annual gross sales from
the same franchise location during the twelve-month
period immediately preceding the opening of the new
franchise, outlet or point(s) of sale, is determined to
have been less than 5 percent during the first twelve
months following the opening of such new franchise,
outlet or points of sale;
(2) the franchisor, prior to offering the new
franchise to another owner, has provided the existing
franchisee a right of first refusal for the new fran-
chise location on, at least, the same terms and con-
ditions available to the other potential franchisee, or,
if the new location is an outlet to be owned by the
franchisor, or one or more points of sale to be owned
or controlled by the franchisor, the existing
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franchisee is provided a right of first refusal on the
terms and conditions that would ordinarily be of-
fered to a franchisee or other licensee for similarly
situated outlet, location or point of sale;
(3) the franchisor does not offer a right of first
refusal, but agrees to compensate the existing
franchisee or franchisees for market sales diverted
by the opening of a new franchise, outlet or points
of sale, provided that the franchisor and franchisee
agree upon the proper amount of such compensation
to be provided, or, if the franchisor and franchisee
cannot agree to the proper amount of such com-
pensation—
(A) each party shall appoint an independ-
ent appraiser to determine the amount of such
compensation;
(B) if the independent appraisers are un-
able to agree on the appropriate amount of
such compensation, the independent appraisers
shall appoint a third appraiser to determine the
level of compensation; and
(C) the determination of the independent
appraiser shall be final and binding; and
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(4) the franchisor, prior to granting or licensing
a new franchise or opening a new outlet or one or
more points of sale—
(A) provides reasonable notice to all
franchisees in proximity of the proposed fran-
chise, outlet or point of sale to determine if a
franchisee objects to the proposed franchise,
outlet or point of sale as having an adverse im-
pact on sales of an existing franchise; and
(B) agrees that, upon receiving an objec-
tion in writing from an existing franchisee, the
matter will be submitted for resolution by an
impartial arbitrator, provided—
(i) the selection of an arbitrator and
the time and location of any arbitration
proceeding are determined by agreement of
the parties or their counsel;
(ii) the burden of proof is on the
franchisor to show that the market area of
the proposed franchise, outlet or point of
sale is not being served by any existing
franchise and that the proposed franchise,
outlet or point of sale will not unduly re-
duce sales of existing franchises; and
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(iii) the decision of the arbitrator shall
be binding, to the effect that if the arbitra-
tor rules against the franchisor, the pro-
posed franchise, outlet or point of sale can-
not be granted or opened.
(d) BURDEN OF PROOF.—With regard to any civil
action brought under subsection (a)—
(1) the franchisee shall have the burden of
proof to document the amount of any reduction in
gross sales and income resulting from the opening
and operation in unreasonable proximity to an exist-
ing franchise of the new franchise, outlet or point of
sale; and
(2) the franchisor shall have the burden of
proof to show that, or the extent to which, a decline
in sales of an existing franchise or franchises oc-
curred for reason other than the opening and oper-
ation in unreasonable proximity to the existing fran-
chise of the new franchise, outlet or point of sale.
(e) FILING LIMITATION.—Notwithstanding the provi-
sions of section 10(a)(2) of this Act, any civil action
brought under this section shall be filed within eighteen
months following the opening and operation of the new
franchise, outlet or point of sale.
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SEC. 9. PROCEDURAL FAIRNESS.
(a) It shall be unlawful for any franchisor or
subfranchisor, either directly or indirectly through any of-
ficer, employee, agent, representative or attorney to—
(1) require any term or condition in a franchise
agreement, or in any agreement ancillary or collat-
eral to a franchise, which directly or indirectly vio-
lates any provision of this Act;
(2) require a franchisee to assent to any dis-
claimer, waiver, release, stipulation or other provi-
sion which would purport—
(A) to relieve any person from a duty im-
posed by this Act, except as part of a settle-
ment of an bona fide dispute; or
(B) to protect any person against any li-
ability to which he would otherwise be subject
under the Act by reason of willful misfeasance,
bad faith, or gross negligence in the perform-
ance of duties, or by reason of reckless dis-
regard of obligations and duties under the fran-
chise agreement; or
(3) require a franchisee to assent to any waiver,
release, stipulation or other provision, either as part
of any agreement or document relating to the oper-
ation of a franchise business, in any agreement or
document relating to the termination, cancellation,
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(2) deprive a franchisee of the right to com-
mence an action (or, if the franchise provides for ar-
bitration, initiate an arbitration) against the
franchisor for violation of the Act, or for breach of
the franchise agreement or of any agreement or stip-
ulation ancillary or collateral to the franchise, in a
court (or arbitration forum) in the state of the
franchisee’s principal place of business; or
(3) exclude collective action by franchisees to
settle like disputes arising from violation of this Act
either by civil action or arbitration.
(d) Compliance with this Act or with an applicable
State franchise law is not waived, excused or avoided, and
evidence of violation of this Act or of such State law shall
not be excluded, by virtue of an integration clause, any
provision of a franchise agreement or an agreement ancil-
lary or collateral to a franchise, the parol evidence rule,
or any other rule of evidence purporting to exclude consid-
eration of matters outside the franchise agreement.
SEC. 10. ACTIONS BY PRIVATE PERSONS.
(a)(1) Any person injured by a violation of any provi-
sion or standard of this Act shall have a right of action
for all damages caused by the violation, including costs
of litigation and reasonable attorney’s fees, against any
person found to be liable for such violation.
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(2) An action may be brought, without regard to the
amount in controversy, in any United States district court,
in any State court, or in any other court of competent
jurisdiction, before the later of:
(A) Five years after the date on which the vio-
lation occurred.
(B) Three years after the date on which the
violation was discovered or should have been discov-
ered through exercise of reasonable diligence.
(b) Any person injured by a violation of this Act, or
threatened with injury by an impending violation of this
Act, may bring an action in a United States district court,
in any State court or in any other court of competent ju-
risdiction to obtain a declaratory judgment that an act or
conduct constitutes or would constitute a violation of this
Act and to enjoin a person who has violated, is violating,
or who is otherwise likely to violate any provision of this
Act. In such actions, the court may issue a temporary re-
straining order or preliminary injunction to protect the
public interest by halting a recurring or likely violation
of this Act, prior to a final determination on the merits,
in conformity with the principles governing the granting
of preliminary relief in other civil actions, except that no
showing of special or irreparable damage to such person
shall have to be made.
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(c)(1) In any action brought under subsections (a)
or (b) of this section, a court shall have the power to inter-
pret any benefit conferred, duty imposed, or restriction ap-
plied in favor of or against any party to a franchise agree-
ment as reciprocal and equally applicable to the other
party to the agreement and to provide an identical or simi-
lar benefit, impose an identical or similar duty, or apply
an identical or similar restriction on such other party to
the agreement, provided that such reciprocal application
is consistent with the laws of the State in which the fran-
chise business is located.
(2) A court shall apply any provision contained in a
franchise agreement which purports to restrict the ability
of one party to compete with the other party during the
term of the franchise agreement reciprocally to the extent
deemed fair and appropriate.
(d)(1) Except as otherwise provided in paragraph (2)
of this subsection, nothing contained in this Act shall limit
the right of a franchisor and a franchisee to agree to arbi-
tration, mediation or other nonjudicial resolution of a dis-
pute, either in advance or after a dispute arises, provided
that the standards and protections applied in any binding
nonjudicial procedure agreed to by the parties are not less
than the requirements set forth in this Act.
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(2) Any stipulation or provision of a franchise agree-
ment requiring use of arbitration or other nonjudicial res-
olution to resolve disputes arising under the agreement
shall not apply to bar an action brought in a United States
district court or in any other court of competent jurisdic-
tion pursuant to this section involving a request for dam-
ages and/or equitable relief for an alleged violation of any
provision of this Act, except where such request is frivo-
lous or insubstantial. A determination of whether a re-
quest for damages and/or equitable relief is frivolous or
insubstantial shall be made by the court in which the ac-
tion is filed at any hearing at which all parties are present
or represented by counsel.
(e) The private rights provided in this section are in
addition to, and no in lieu of other rights or remedies cre-
ated by Federal or State law or regulation.
SEC. 11. ACTIONS BY STATE ATTORNEYS GENERAL.
(a) Whenever an 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 adversely af-
fected because any person has engaged or is engaging in
a pattern or practice which violates any provision of this
Act, the State, as parens patriae, may bring a civil action
on behalf of its residents in an appropriate district court
of the United States to enjoin such violations, to obtain
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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) For purposes of bringing any civil action under
subsection (a), nothing in this Act shall prevent an attor-
ney general from exercising the powers conferred on the
attorney general by the laws of such State to conduct in-
vestigations or to administer oaths or affirmations or to
compel the attendance of witnesses or the production of
documentary and other evidence.
(c) Any civil action brought under subsection (a) in
a district court of the United States may be brought in
the district in which the defendant is found, is an inhab-
itant, or transacts business or wherever venue is proper
under section 1391 of title 28, United States Code. Proc-
ess 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) Nothing contained in this section shall prohibit
an authorized State official from proceeding in State court
on the basis of an alleged violation of any civil or criminal
statute of such State.
SEC. 12. EFFECT ON OTHER LAW.
(a) This Act preempts State law only to the extent
that State law is inconsistent with any provision of this
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Act, in terms of providing less protection to the franchisee
than provided by this Act, and then only to the extent
of such inconsistency.
(b) Nothing in this Act shall be interpreted—
(1) to alter or relieve any franchisor or
subfranchisor from the obligation to comply with the
laws of any State, except to the extent that such
laws are inconsistent with any provision of this Act;
or
(2) to preclude a State from enacting any law
or regulation that affords a greater level or broader
range of protections to franchisees.
SEC. 13. CENSUS DATA ON FRANCHISE BUSINESSES.
(a) The Bureau of the Census of the Department of
Commerce (hereafter, the ‘‘Bureau of the Census’’) shall
include in its Business Census for 1997, and in each such
succeeding census, statistical information on the number,
ownership and operation of franchise businesses.
(b) The Bureau of the Census shall—
(1) consult with the Federal Trade Commission
to establish criteria and procedures to identify fran-
chise businesses to be included in the Business Cen-
sus; and
(2) consult with the Congress, the Federal
Trade Commission and other interested organiza-