Bill regulating franchise contracts gets tentative OK

By Jakob Thorington | Arizona Capitol Times

A Democratic-sponsored bill regulating franchisors’ ability to terminate contracts with a franchisee passed a House committee with bipartisan support, but Republicans say the bill needs improvement before it’s ready for the floor.

The House Commerce Committee passed HB2404 on Feb. 14 in a 9-1 vote. The bill is sponsored by Rep. Stacey Travers, D-Tempe, and is intended to protect franchisees from getting caught into a contract they would have likely not signed after the franchisor sells the business to a private equity firm.

“I have spoken to several Republican members both in the Senate and here in the House who have expressed an interest that we need this kind of regulation – this protection for franchisees,” Travers said during the hearing. “I’m very hopeful that going forward, there’s more dialogue that we can have.”

The bill prohibits a franchisor, who typically owns a large commercial brand like McDonald’s, from terminating a contract with a franchisee, who is the small business owner who owns a franchisor store, “except for good cause.” It also would require a franchisor to provide written notice if they intend to terminate or not renew the contract. Franchisors would also be prohibited from preventing a franchisee from selling or transferring the franchise.


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February 2023