Section 120. Certifying franchises

A business operating under a franchise or license agreement may be certified if it meets the eligibility requirements. In addition:

1. The franchise agreement between the franchisor and the franchisee seeking certification must not contain any provision that unreasonably restricts the ability of the women, minority, or individual owners from exercising managerial control and operational authority of the business.

2. In reviewing the franchise agreement, special attention shall be given to circumstances that, for certification purposes, shall be considered as restricting control and authority of the women, minority, or individual owners. These include:

a. Termination of the franchise agreement by the franchisor without cause;

b. Lack of ownership of receivables by the franchisee;

c. Exclusive ownership of account receivables, contracts, or both by the franchisor;

d. Restrictions on the sale of the business below market value;

e. Terms and conditions not related to the brand or systems that can be altered without franchisee's notification, approval, or both;

f. Contracts are prepared and approved by the franchisor;

g. Management decisions cannot be made independently by the franchisee;

h. No financial risk is borne by the franchisee;

i. Hiring and firing decisions cannot be made independently by the franchisee; or

j. Equity interest in the franchise is owned by the franchisor.

3. Where there are inconsistencies between the standards and procedures in this section and other sections within this regulation, this section will prevail.

Historical Notes

Derived from Volume 32, Issue 25, eff. August 8, 2016.

Statutory Authority

§ 2.2-1606 of the Code of Virginia.