Hawaii Administrative Rules › Title 16 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS › Chapter 37 - RULES UNDER THE FRANCHISE INVESTMENT LAW › Subchapter 1 - GENERAL PROVISIONS › Section 16-37-1 - Definitions

Current through June, 2024
Unless the context indicates otherwise, as used in these
				  rules:
"Bona fide wholesale transaction" means that in any
				  determination as to whether a marketing plan or system of a manufacturer,
				  licensor, or franchisor is a bona fide wholesale transaction or a series
				  thereof, the director may consider, but not be limited to, the
				  following:
(1) Whether, in connection with an agreement to process,
				  resell, or otherwise distribute a manufacturer's or licensor's product or
				  service, consideration in purchase transactions thereunder is solely for the
				  payments of goods, services, equipment, inventory, or real estate and such
				  consideration does not reflect, in part or in whole, payment for the right to
				  continue such purchase transactions or business whether on the same or
				  different terms than those stated in the subject agreement.
(2) Whether, in connection with an agreement to process,
				  resell, or otherwise distribute a manufacturer's or licensor's product or
				  service, a purchase of goods, services, equipment, inventory, or real estate is
				  required.
(3) Whether, in connection with an agreement to process,
				  resell, or otherwise distribute a manufacturer's or licensor's product or
				  service, the cost of goods, services, equipment, inventory, or real estate
				  thereunder to the seller thereof is reasonably related to the price of the same
				  to the distributor or licensee, taking into account the respective
				  circumstances in the market of both the seller and buyer thereof.
"Director" means the director of regulatory agencies.
"Franchise fee" may be determined by the director to
				  include, but not be limited to, the following:
(1) Payment which is made before, upon, or after execution of
				  an agreement to purchase, process, resell, or otherwise distribute a
				  manufacturer's or licensor's goods, services, equipment, inventory, or real
				  estate; and
(2) Said payment is made in the form of a lump sum,
				  installments, periodic royalties, profits, or cash flow, or is or may be
				  reflected in the price of goods, services, equipment, inventory, or real estate
				  sold by the licensor to the distributor or licensee.
"Material event or material change" may be determined by the
				  director to include, but not be limited to, the following:
(1) The termination, closing, or failure to renew during any
				  three-month period of:
(A) The greater of one per cent or five of all franchises of
				  a franchisor or subfranchisor regardless of location or
(B) The lesser of fifteen per cent or two of the franchises
				  of a franchisor or subfranchisor located in this State.
(2) Any change in control, corporate name, or state of
				  incorporation, or reorganization of the franchisor whether or not the
				  franchisor or its parent, if the franchisor or subfranchisor is a subsidiary,
				  is required to file reports under section 12 of the Securities Exchange Act of
				  1934.
(3) The purchase by the franchisor in excess of five per cent
				  of its existing franchises during any three-month period on a continuous
				  basis.
(4) The commencement of any new product, service, or model
				  line involving, directly or indirectly, additional investment by any franchisee
				  or the discontinuation or modification of the marketing plan or system of any
				  product or service of the franchisor where the total sales from such product or
				  service exceeds twenty per cent of the gross sales of the franchisor on an
				  annual basis.
"Net worth" shall include the excess of assets over
				  liabilities which are recognized by generally accepted accounting principles
				  consistently applied with the exception that:
(A) Intangible assets in making the above computation shall
				  include only the liquidation value of such intangibles,
(B) Receivables of a franchisor due from its franchisees
				  shall be stated with an appropriate asset offset or reserve for losses,
				  and
(C) Lump sum franchise fee receipts, or any portion thereof,
				  shall include an appropriate offset under liabilities for accrued obligations
				  to be performed in part or in whole as consideration for such fees.
"The Act" means Act 18, Session Laws of Hawaii 1974, or
				  chapter 482E, Hawaii Revised Statutes.