More Flexibility for Franchisees
Previously, corporations could prevent franchisees from entering into beneficial trade associations. The SBFA makes the prohibition of the associations unlawful as long as the intent of the association is appropriate.Also, under the Act, the franchisee may not be required to purchase all of his/her goods and materials from a specific vendor. The franchisee may obtain the items from another source as long as they still meet the criteria as outlined by the franchisor.
Transfers and Termination
The SBFA requires that franchisees are given 30 days notice if the franchise company is transferred to another entity. Also, if a franchisee sells its franchise to a new franchisee, he/she is able realize equity at the time of the sale as long as the new franchisee meets the franchisor's criteria.The Small Business Franchise Act protects the franchisee from losing his/her business without warning. The franchisor must allow a 30-day period of time for the franchisee to correct any deficiencies. The franchisor must have good cause in order to terminate the franchisee.
Post-Ownership
Once the franchisee's term expires, the SBFA allows the former franchisee to engage in any business at any location provided that there is no longer any use of the franchisor's property, trademark, or trade secrets.Opponents of the SBFA
The Antitrust Section of the American Bar Association (ABA) states that the Act could cause some issues that would be against antitrust policies. This section contends that the Act could place too many limits on a business's innovative efforts. It could also make it too difficult for a franchisor to dissolve a relationship with an unsatisfactory franchisee.The Antitrust Section proposes that most of the goals of the SBFA can be met by the use of more comprehensive disclosures made by the franchisor prior to the final franchise agreement.
