You asked for a summary of An Act Concerning Gasoline Franchises (HB 5450).

This report summarizes the bill as raised by the General Law Committee and does not include the suggestion made at a public hearing that the bill be amended to give a retailer, or group of retailers, the right of first refusal for the entire package of gasoline stations or any other substitute language.

SUMMARY

The bill requires a gasoline franchisor that wishes to sell a group of retail premises to offer them to the franchisees first and, if another organization subsequently offers to buy the group, to give the franchisees the right of first refusal.

The bill prohibits gasoline refiners and distributors from (1) requiring or coercing franchisees to sell gasoline at a specific price or in a price range or (2) using the expected retail price of gasoline to determine the wholesale price.

The bill addresses what must occur before a franchisor sells a group of retail premises. Existing law regulates certain aspects of the relationship between franchisees and the successor franchisor after a group has been sold.

PACKAGE OF GASOLINE STATIONS

The bill requires a gasoline franchisor that intends to sell, transfer, or assign his interest in two or more marketing premises (gasoline stations) as a package to first (1) make a bona fide offer to sell, transfer, or assign the interest in each premises to each affected franchisee or (2) if applicable, offer each affected franchisee a right of first refusal of an acceptable bona fide offer made to purchase the franchisor’s interest in the franchisee’s premises.

The bill states that any franchisee may accept the offer and provides that if more than one retailer accepts, the franchisor must offer the premises to the franchisee that offers the highest price.

PRICES

The bill prohibits gasoline refiners and distributors from (1) requiring or coercing franchisees (which can be either distributors or retailers) to sell gasoline at a specific price or in a price range or (2) using the expected retail price of gasoline to determine the wholesale price charged to a franchisee.

BACKGROUND

Current Law on Franchisees after a Group of Stations Has Been Sold

The General Assembly adopted a law in 2000 that governs certain aspects of the relationship between franchisors and their franchisees after a group of gas stations has been sold. Under current law, after a franchisor has sold, transferred, or assigned its interest in two or more gasoline stations as a package, any change in the terms and conditions of the franchise agreement in effect at the time of the sale, transfer, or assignment must be made by mutual agreement of the franchisee and successor owner.

The successor owner, at the time that agreement expires, must renew the franchise agreement for the same number of years as the prior agreement, up to a maximum of five years. For example, a three-year agreement must be renewed for three years and a 10-year agreement must be renewed for five years. The law requires the successor owner to submit any changes in the agreement in good faith and both the successor owner and franchisee to negotiate them in good faith.

The law prohibits the successor owner from requiring the franchisee to (1) take part in the successor owner's promotional campaigns, (2) meet sales quota, (3) sell products at a price suggested by the successor owner or supplier, (4) keep the premises open and operating during hours documented by the franchisee as unprofitable to the franchisee or after 10: 00 p. m. and before 6: 00 p. m. , and (5) disclose to the successor owner or supplier financial records relating to the operation of the franchise which are not related or necessary to the franchisee's obligation under the franchise agreement. The law states that these provisions do not affect the successor owner's ability to terminate, cancel, or fail to renew a franchise agreement for good cause shown.

DD: ro