Fair Franchise Practices Bill: Limited Fiduciary Duty

(UnhappyFranchisee.Com) Proposed PA House Bill 1620 (Fair Franchise Practices Bill) establishes that the franchisor owes a fiduciary duty to its franchisee, and is obligated to “exercise the highest standard of care” in terms bookkeeping, use of franchisee information, and administration and reporting of the franchise ad fund.

It states:

§ 906. Limited fiduciary duty.

Without regard to whether a fiduciary duty is imposed generally on the franchisor by virtue of a franchise relationship, the franchisor owes a fiduciary duty to its franchisee and is obligated to exercise the highest standard of care in all of the following:

(1) Performing bookkeeping, collections, payroll or accounting services on behalf of the franchisee. The franchisor may only use the information concerning the franchised business gained while performing the services under this paragraph for good faith and legitimate business purposes. As used in this paragraph, the term "good faith and legitimate business purposes" does not include competition with the franchisee.

(2) Administering or supervising the administration of an advertising or promotional fund to which the franchisee is

required to make contributions. The following apply to a fund under this paragraph:

(i) The fund:

(A) shall be kept in a segregated account; and

(B) shall not be subject to the claim of a creditor of the franchisor.

(ii) The franchisor shall, at the franchisor’s own expense, provide an independent certified audit of the fund within 60 days following the close of the franchisor’s fiscal year. The audit shall fully disclose all fees, expenses or other payments from the fund to the franchisor.

What do you think of the Limited Fiduciary Duty provision of the proposed PA House Bill 1620 (Fair Franchise Practices Bill)?

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TAGS: Limited Fiduciary Duty, franchise legislation, PA House Bill 1620, PA Responsible Franchise Practices Bill, Fair Franchising Legislation, Franchise laws, Pennsylvania State Rep. Peter Daley