§ 47-25-622 — Creation of franchise - Mandatory conditions

(a) Every franchise agreement as defined herein shall be subject to the nonwaivable provisions set forth in this section, whether or not they are expressly set forth in the agreement. (b) (1) No agreement shall contain any provision which in any way limits the right of either party to trial by jury, the interposition of counter-claims or cross-claims. (2) 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 herein 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 are prohibited. A service station dealer or wholesale distributor may sell any products listed in this agreement for a price which such dealer or distributor alone may decide." (3) The franchisee may assign the franchise agreement, upon such price and upon such financial terms as the franchisee and the assignee may agree; provided, that the franchisor consents to such assignment, which consent shall not be unreasonably withheld; and provided further, that franchisor must have good cause to withhold such consent. (A) For the purposes of this section, "good cause" includes, but is not limited to: (i) Inexperience or lack of qualifications on the part of the assignee; (ii) Poor credit rating of assignee; (iii) Inadequate financial resources necessary for the initial investment, the analysis of which shall take into consideration any sums the assignee has agreed to pay the franchisee; (iv) Criminal record of the assignee; and (v) The franchisor, for valid business reasons, chooses to eliminate a service station operation at the franchisee's location at the conclusion of the business relationship between franchisor and franchisee. (B) The franchisee may not exercise the right of assignment after having been duly notified of termination or nonrenewal of the franchise agreement for cause as described in the federal Petroleum Marketing Practices Act. (4) In the event of the death of the franchisee, the surviving spouse or adult children of such franchisee will have first right of refusal to become the new franchisee; provided, that the franchisor consents, which consent shall not be unreasonably withheld; and provided further, that the franchisor must have good cause to withhold such consent. For the purposes of this section, "good cause" as described in subdivision (b)(3) is applicable. (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 product ordered, such deposit shall be held by the franchisor, may be used by the franchisor in the franchisor's business, and shall be retained for the term of the agreement unless it is sooner terminated. Interest at a rate of at least six percent (6%) shall be paid to the franchisee at least annually unless agreed otherwise. Within ninety (90) days after the termination of the agreement, the deposit shall be returned, together with any unpaid interest on such deposit, at the rate of at least six percent (6%) per year. The franchisor may deduct from the amount to be returned any amount owed the franchisor by the franchisee at the time of settlement.

Legislative History

Acts 1977, ch. 422, § 2(B); 1979, ch. 260, §§ 1, 2; T.C.A., § 69-722.