Opinion ID: 1192553
Heading Depth: 3
Heading Rank: 3

Heading: More Inclusive Legislation

Text: The National Conference of Commissioners on Uniform State Laws (NCCUSL) approved a uniform law in the field of franchising in 1987. See The Uniform Franchise and Business Opportunities Act, 7A ULA, at 115 (1995 Cum.Ann.Pocket Part). The NCCUSL Drafting Committee worked to construct an act that balances the interests of franchisors, franchisees, and the publican act that provides sensible law for franchising arrangements.... Current law, in many instances, misses a fair balance between the interests of franchisor and franchisee and often ignores altogether the interests of consumers, other franchisees in the particular franchise system, or prospective franchisees in that system. Id., Prefatory Note, at 116. The Uniform Act codifies certain minimum standards of conduct, governs franchise sales practices, and provides both a private remedy and a public investigatory and enforcement power. Section 201 of the Uniform Act provides a duty of good faith, requiring honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. Id. at 125. No state has yet adopted the Uniform Act; however, the Uniform Act reflects a growing body of state statutory law. Some states have enacted legislation relating to franchises to address issues originating in the imbalance of power between franchisor and franchisee that are not limited to automobile dealerships. See, e.g., 16 C.F.R. §§ 436.1, .2, .3 (1994); Haw.Rev.Stat. § 482E-1 et seq. (1993); 815 Ill.Comp.Stat. 705/1-44 (Smith-Hurd 1994); Mich.Comp.Laws Ann. § 445.1501 et seq. (West 1989); Minn.Stat. § 80C.01 et seq. (1994); N.Y.Gen.Bus.Law §§ 680, 683 (Consol.1994); N.D.Cent.Code § 51-19-08 (1989); S.D.Codified Laws Ann. §§ 37-5A-16 to -28 (1994). Recognizing that franchisors and franchisees have unequal bargaining power, see generally Mark Pruitt, Disclosure and Good Cause Legislation: Where's the Beef in Franchise Regulation?, 90 Com.L.J. 563 (1985) (imbalance of power is informational in character before franchise sales and it becomes an imbalance of contractual control once the agreements have been consummated), these enactments attempt to protect a franchisee's investment by holding franchisors to a standard of fair practice and good-faith dealings. Id. at 565. Sample requirements in the various statutes include (1) requiring franchisors to register with the appropriate state agency before selling a franchise in order to grant equal notice to members of the public for purchase options and to prevent unfair competition, see, e.g., Minn.Stat. § 80C.02; (2) requiring franchisors to completely disclose all information necessary to permit prospective franchisees to make informed decisions prior to purchase, see, e.g., id. at § 80C.06; and (3) prohibiting franchisors from terminating the franchise business without good cause, thereby protecting the franchisee's business investments, see, e.g., id. at § 80C.13 (Subd. 3). California has a comprehensive enactment governing franchises; its Franchise Investment Law governs prepurchase actions culminating in formation of a franchise, while its Franchise Relations Act governs dealings after purchase. See Cal.Corp.Code §§ 31000 to 31019 (West 1977 & Cum.1995) and Cal.Bus. and Prof.Code §§ 20000 to 20043 (West 1987 & Cum.1995). As the California Legislature noted: It is the intent of this law to provide each prospective franchisee with the information necessary to make an intelligent decision regarding franchises being offered. Further, it is the intent of this law to prohibit the sale of franchises where such sale would lead to fraud or a likelihood that the franchisor's promises would not be fulfilled, and to protect the franchisor by providing a better understanding of the relationship between the franchisor and franchisee with regard to their business relationship. Cal.Corp.Code § 31001. We note that New Mexico does have a Franchise Termination Act. NMSA 1978, §§ 57-23-1 to -8 (Repl.Pamp.1995). However, its purpose is extremely limited. The Franchise Termination Act primarily ensures that franchisees/dealers of farm tractors, farm implements, utility tractors, industrial tractors, attachments and repair parts, § 57-23-2(E), are reimbursed by franchisors/manufacturers for their leftover inventory and outstanding warranty claims upon the termination of a franchise relationship. We conclude that the law of franchising is developing within a wide range of statutory schemes. Sometimes legislatures have targeted particular types of franchises; more recently, there have been efforts to provide a more integrated approach to common problems. We can detect no general public policy that supports a particular construction of the New Mexico Act's standing provisions. However, we note that the more inclusive legislation does not yet reveal any trend toward greater statutory recognition of a prospective franchisee's right to acquire a franchise. This fact suggests that the Act probably was not intended to protect such a right.