House committee reviews H 7733 to tighten rules for franchisors, void noncompetes in franchise agreements

The Commerce & Economic Development committee convened at 9:20 a.m. to hear H 7733, a bill that would impose a new statutory framework on franchisor-franchisee relationships, including a provision declaring any agreement not to compete in a franchise agreement void and unenforceable.

Rick Siegel of the Office of Legislative Council walked the panel through the bill nd its major provisions, which include definitions for franchise terms, limits on franchisor termination authority, mandatory repurchase of inventory at market value after lawful termination, advance-notice requirements for nonrenewal and a prohibition on predispute mandatory arbitration clauses and out-of-state venue restrictions.

Why it matters: If enacted, H 7733 would change the balance of power between franchisors and franchisees on key operational questions — from who controls pricing and purchasing to whether franchisees can be bound by noncompete clauses after separation. The draft also creates a private right of action for franchisees with damages, injunctive relief and attorney-fee recovery.

Key provisions read into the record by Siegel include: - A definition of an "agreement not to compete" that excludes nondisclosure provisions protecting trade secrets; the bill then states any agreement not to compete "is void and unenforceable." (Rick Siegel) - Termination rules…