TITLE 5
Businesses and Professions

CHAPTER 5-55
Motor Fuel Distribution and Sales

SECTION 5-55-4


§ 5-55-4 Franchised dealers and distributors.

(a) Franchisor's duty of disclosure. A franchisor shall disclose, in writing, to any prospective franchisee the following information, before any agreement is concluded:

(1) The gallonage volume history, if any, of the location under negotiation for and during the three (3) year period immediately past or for the entire period which the location has been supplied by the supplier, whichever is shorter.

(2) Projections, if any, as to gallonage consumption at the location under negotiation.

(3) The name and last known address of the previous dealers for the last three (3) years, or for the entire period during which the location has been supplied by the supplier, whichever is shorter, and the reason for the termination of each dealer's agreement.

(4) Any legally binding commitments for the sale, demolition, or other disposition of the location in effect prior to the termination date of the agreement.

(5) The training programs, if any, and the specific goods and services the supplier will provide without cost to the dealer.

(6) Full disclosure of any and all obligations which will be required of the dealer, including, but not limited to, any obligation to exclusively deal in any of the products of the supplier, its subsidiaries or any other company or any advertising and promotional items that the dealer must accept.

(7) Full disclosure of all restrictions on the sale, transfer, renewal, and termination of the agreement.

(b) Franchise agreements. Every franchise agreement, as defined in this chapter, is subject to the nonwaivable provisions described in this subsection, whether or not they are expressly stated in the agreement.

(1) Each retail dealer and each distributor as franchisee has the right to cancel a franchise agreement within seven (7) days after the day on which the agreement was signed, by giving the franchisor written notice of the cancellation. Upon giving the franchisor that notice, all money, equipment, and merchandise in satisfactory condition loaned, sold, or delivered to the franchisee under the agreement shall be returned to the franchisor for full credit, or the cash equivalent. If the franchisor is the owner of the real estate upon which the franchisee conducted his or her business, the franchisee shall deliver full possession of the real estate to the franchisor. The franchisee shall pay the franchisor for all lawful indebtedness remaining due after the return of merchandise and equipment.

(2) No agreement shall contain any provision which in any way limits the right of either party to trial by jury, the interposition of counterclaims or cross-claims.

(3) The price at which a franchisee sells products shall not be fixed or maintained by a franchisor, nor shall any person seek to do so, nor shall the price of products be subject to enforcement or coercion by any person in any manner. Each agreement shall have the legend, "Nothing in this agreement shall be construed to prohibit a franchisor from suggesting prices and counseling with franchisees concerning prices. Price fixing or mandatory prices for any products covered in this agreement shall be prohibited. A service station dealer or wholesale distributor may sell any products listed in this agreement for a price which he or she alone may decide."

(4) Franchisee may assign the franchise agreement; provided, that the franchisor consents to that assignment, which consent is not unreasonably withheld.

(5) If the franchise agreement requires the franchisee to provide a cash deposit in advance for the use of the service station or delivery of fuel, except as advance payment in whole or in part for the product ordered, the deposit may be held by the franchisor, may be used by the franchisor in his or her business, and may be retained for the term of the agreement unless it is sooner terminated. Interest at a rate of at least seven percent (7%) shall be paid to the franchisee at least annually. Within ninety (90) days after the termination of the agreement, the deposit shall be returned, together with any unpaid interest on that deposit at the rate of at least seven percent (7%) per year.

(6) No agreement shall provide for the use of any promotion, premium, coupon, give-away, or rebate in the operation of the business, except that a dealer may participate in a promotion, premium, coupon, give-away, or rebate sponsored by the franchisor, if the dealer desires.

(c) Termination of franchise agreements. No refiner or distributor, as franchisor, shall, directly or through any officer, agent or employee, terminate, cancel, or fail to renew a franchise agreement, except for good cause. For purposes of this section, "good cause" includes, but is not limited to:

(1) With respect to franchise agreements where the franchisor leases real property and improvements to the franchisee, the agreement may be terminated; provided, that there is a lawful termination of lease, license, or other non-ownership under which the franchisor shall be entitled to possession or control of that real property and improvements.

(2) Mutual agreement to terminate.

(3) Criminal misconduct or violation of law relating to the business or premises of the dealer.

(4) Fraud, which includes, but is not limited to, the following:

(i) Adulteration of the franchisor's products;

(ii) Commingling of funds;

(iii) Misleading or misbranding of gasoline;

(iv) Trademark violations;

(v) Intentionally overcharging or deceiving customers as to repairs, which are not needed;

(vi) Intentionally deceiving the franchisor regarding a term of the term of the lease;

(5) Failure of the dealer to open for business for an unreasonable period of time; provided, that the failure is not due to matters beyond the dealer's control.

(6) Bankruptcy or insolvency of the dealer.

(7) Nonpayment of rent, or loss by the franchisor of its legal right to grant possession of leased premises to the dealer.

(8) Public condemnation or other public taking.

(9) Nonpayment of merchandise or other indebtedness due to the franchisor.

(10) Substantial noncompliance with the obligations of the franchise agreement.

(d) Notice of termination. The franchisor shall give the franchisee advance written notice of termination, cancellation, or intent not to renew. Notwithstanding any statute to the contrary, advance notice required by this subsection precedes the effective date of the termination, cancellation, or nonrenewal by at least:

(1) Where the asserted cause is substantial noncompliance with the obligations of the franchise agreement, franchisor shall give the franchisee seven (7) days from receipt of notice in which to correct any breach. If the breach has not been corrected within the seven (7) day period, the franchisor may terminate the franchise agreement in accordance with the notice requirements of the franchise agreement.

(2) One hundred twenty (120) days where the asserted cause is among those specified in subdivision (c)(1) of this section, or

(3) Seven (7) days where the asserted cause is among those specified in subdivisions (c)(3), (c)(4) and (c)(5) of this section; provided, that the franchisee has seven (7) days from receipt of the notice in which to correct the matter asserted as cause for terminating the agreement.

(e) Compensation on termination of franchise. Upon the termination of any franchise, the franchisee shall be entitled to fair and reasonable compensation by the franchisor at the then current wholesale prices, for the franchisee's merchantable inventory, supplies, equipment, and furnishings purchased by the franchisee from the franchisor; provided, that in that event the franchisor has the right to apply the proceeds against any existing indebtedness owed to the franchisor by the franchisee and; provided, that the repurchase obligation is conditioned upon there being no other claim or liens against the products by or on behalf of other creditors of the franchisee.

History of Section.
(P.L. 1976, ch. 324, § 1.)