13-35-201. Prohibited acts by franchisors -- Disclosures.
(1) A franchisor in this state may not:
(a) except as provided in Subsection (2), require a franchisee to order or accept delivery
of any new powersport vehicle, part, accessory, equipment, or other item not otherwise required
by law that is not voluntarily ordered by the franchisee;
(b) require a franchisee to:
(i) participate monetarily in any advertising campaign or contest; or
(ii) purchase any promotional materials, display devices, or display decorations or
materials;
(c) require a franchisee to change the capital structure of the franchisee's dealership or
the means by or through which the franchisee finances the operation of the franchisee's
dealership, if the dealership at all times meets reasonable capital standards determined by and
applied in a nondiscriminatory manner by the franchisor;
(d) require a franchisee to refrain from participating in the management of, investment
in, or acquisition of any other line of new powersport vehicles or related products, if the
franchisee:
(i) maintains a reasonable line of credit for each make or line of powersport vehicles; and
(ii) complies with reasonable capital and facilities requirements of the franchisor;
(e) require a franchisee to prospectively agree to a release, assignment, novation, waiver,
or estoppel that would:
(i) relieve a franchisor from any liability, including notice and hearing rights imposed on
the franchisor by this chapter; or
(ii) require any controversy between the franchisee and a franchisor to be referred to a
third party if the decision by the third party would be binding;
(f) require a franchisee to change the location of the principal place of business of the
franchisee's dealership or make any substantial alterations to the dealership premises, if the
change or alterations would be unreasonable;
(g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
advertising association;
(h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the
franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to
cancel a franchise agreement or other contractual agreement or understanding existing between
the franchisor and franchisee;
(i) adopt, change, establish, modify, or implement a plan or system for the allocation,
scheduling, or delivery of new powersport vehicles, parts, or accessories to its franchisees so that
the plan or system is not fair, reasonable, and equitable;
(j) increase the price of any new powersport vehicle that the franchisee has ordered from
the franchisor and for which there exists at the time of the order a bona fide sale to a retail
purchaser if the order was made prior to the franchisee's receipt of an official written price
increase notification;
(k) fail to indemnify and hold harmless its franchisee against any judgment for damages
or settlement approved in writing by the franchisor:
(i) including court costs and attorneys' fees arising out of actions, claims, or proceedings
including those based on:
(A) strict liability;
(B) negligence;
(C) misrepresentation;
(D) express or implied warranty;
(E) revocation as described in Section 70A-2-608; or
(F) rejection as described in Section 70A-2-602; and
(ii) to the extent the judgment or settlement relates to alleged defective or negligent
actions by the franchisor;
(l) threaten or coerce a franchisee to waive or forbear its right to protest the
establishment or relocation of a same line-make franchisee in the relevant market area of the
affected franchisee;
(m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new
powersport vehicles of each make, series, and model needed by the franchisee to achieve a
percentage of total new vehicle sales of each make, series, and model equitably related to the
total new vehicle production or importation being achieved nationally at the time of the order by
each make, series, and model covered under the franchise agreement;
(n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
facilities;
(o) fail to include in any franchise agreement the following language or language to the
effect that: "If any provision in this agreement contravenes the laws, rules, or regulations of any
state or other jurisdiction where this agreement is to be performed, or provided for by such laws
or regulations, the provision is considered to be modified to conform to such laws, rules, or
regulations, and all other terms and provisions shall remain in full force.";
(p) engage in the distribution, sale, offer for sale, or lease of a new powersport vehicle to
purchasers who acquire the vehicle in this state except through a franchisee with whom the
franchisor has established a written franchise agreement, if the franchisor's trade name,
trademark, service mark, or related characteristic is an integral element in the distribution, sale,
offer for sale, or lease;
(q) except as provided in Subsection (2), authorize or permit a person to perform
warranty service repairs on powersport vehicles, except warranty service repairs:
(i) by a franchisee with whom the franchisor has entered into a franchise agreement for
the sale and service of the franchisor's powersport vehicles; or
(ii) on owned powersport vehicles by a person or government entity who has purchased
new powersport vehicles pursuant to a franchisor's or manufacturer's fleet discount program;
(r) fail to provide a franchisee with a written franchise agreement;
(s) notwithstanding any other provisions of this chapter, unreasonably fail or refuse to
offer to its same line-make franchised dealers all models manufactured for that line-make, or
unreasonably require a dealer to pay any extra fee, remodel, renovate, recondition the dealer's
existing facilities, or purchase unreasonable advertising displays or other materials as a
prerequisite to receiving a model or series of vehicles;
(t) except as provided in Subsection (5), directly or indirectly:
(i) own an interest in a new powersport vehicle dealer or dealership;
(ii) operate or control a new powersport vehicle dealer or dealership;
(iii) act in the capacity of a new powersport vehicle dealer, as defined in Section
13-35-102; or
(iv) operate a powersport vehicle service facility;
(u) fail to timely pay for all reimbursements to a franchisee for incentives and other
payments made by the franchisor;
(v) directly or indirectly influence or direct potential customers to franchisees in an
inequitable manner, including:
(i) charging a franchisee a fee for a referral regarding a potential sale or lease of any of
the franchisee's products or services in an amount exceeding the actual cost of the referral;
(ii) giving a customer referral to a franchisee on the condition that the franchisee agree to
sell the vehicle at a price fixed by the franchisor; or
(iii) advising a potential customer as to the amount that the potential customer should
pay for a particular product;
(w) fail to provide comparable delivery terms to each franchisee for a product of the
franchisor, including the time of delivery after the placement of an order by the franchisee;
(x) if personnel training is provided by the franchisor to its franchisees, unreasonably fail
to make that training available to each franchisee on proportionally equal terms;
(y) condition a franchisee's eligibility to participate in a sales incentive program on the
requirement that a franchisee use the financing services of the franchisor or a subsidiary or
affiliate of the franchisor for inventory financing;
(z) make available for public disclosure, except with the franchisee's permission or under
subpoena or in any administrative or judicial proceeding in which the franchisee or the franchisor
is a party, any confidential financial information regarding a franchisee, including:
(i) monthly financial statements provided by the franchisee;
(ii) the profitability of a franchisee; or
(iii) the status of a franchisee's inventory of products;
(aa) use any performance standard, incentive program, or similar method to measure the
performance of franchisees unless the standard or program:
(i) is designed and administered in a fair, reasonable, and equitable manner;
(ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample; and
(iii) is, upon request by a franchisee, disclosed and explained in writing to the franchisee,
including:
(A) how the standard or program is designed;
(B) how the standard or program will be administered; and
(C) the types of data that will be collected and used in the application of the standard or
program;
(bb) other than sales to the federal government, directly or indirectly, sell, lease, offer to
sell, or offer to lease, a new powersport vehicle or any powersport vehicle owned by the
franchisor, except through a franchised new powersport vehicle dealer;
(cc) compel a franchisee, through a finance subsidiary, to agree to unreasonable
operating requirements, except that this Subsection (1)(cc) may not be construed to limit the right
of a financing subsidiary to engage in business practices in accordance with the usage of trade in
retail and wholesale powersport vehicle financing;
(dd) condition the franchisor's participation in co-op advertising for a product category
on the franchisee's participation in any program related to another product category or on the
franchisee's achievement of any level of sales in a product category other than that which is the
subject of the co-op advertising;
(ee) discriminate against a franchisee in the state in favor of another franchisee of the
same line-make in the state by:
(i) selling or offering to sell a new powersport vehicle to one franchisee at a higher actual
price, including the price for vehicle transportation, than the actual price at which the same
model similarly equipped is offered to or is made available by the franchisor to another
franchisee in the state during a similar time period;
(ii) except as provided in Subsection (6), using a promotional program or device or an
incentive, payment, or other benefit, whether paid at the time of the sale of the new powersport
vehicle to the franchisee or later, that results in the sale of or offer to sell a new powersport
vehicle to one franchisee in the state at a higher price, including the price for vehicle
transportation, than the price at which the same model similarly equipped is offered or is made
available by the franchisor to another franchisee in the state during a similar time period; or
(iii) except as provided in Subsection (7), failing to provide or direct a lead in a fair,
equitable, and timely manner; or
(ff) through an affiliate, take any action that would otherwise be prohibited under this
chapter.
(2) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee
carry a reasonable inventory of:
(a) new powersport vehicle models offered for sale by the franchisor; and
(b) parts to service the repair of the new powersport vehicles.
(3) Subsection (1)(d) does not prevent a franchisor from:
(a) requiring that a franchisee maintain separate sales personnel or display space; or
(b) refusing to permit a combination of new powersport vehicle lines, if justified by
reasonable business considerations.
(4) Upon the written request of any franchisee, a franchisor shall disclose in writing to
the franchisee the basis on which new powersport vehicles, parts, and accessories are allocated,
scheduled, and delivered among the franchisor's dealers of the same line-make.
(5) (a) A franchisor may engage in any of the activities listed in Subsection (1)(t), for a
period not to exceed 12 months if:
(i) (A) the person from whom the franchisor acquired the interest in or control of the new
powersport vehicle dealership was a franchised new powersport vehicle dealer; and
(B) the franchisor's interest in the new powersport vehicle dealership is for sale at a
reasonable price and on reasonable terms and conditions; or
(ii) the franchisor is engaging in the activity listed in Subsection (1)(t) for the purpose of
broadening the diversity of its dealer body and facilitating the ownership of a new powersport
vehicle dealership by a person who:
(A) is part of a group that has been historically underrepresented in the franchisor's
dealer body;
(B) would not otherwise be able to purchase a new powersport vehicle dealership;
(C) has made a significant investment in the new powersport vehicle dealership which is
subject to loss;
(D) has an ownership interest in the new powersport vehicle dealership; and
(E) operates the new powersport vehicle dealership under a plan to acquire full
ownership of the dealership within a reasonable period of time and under reasonable terms and
conditions.
(b) After receipt of the advisory board's recommendation, the executive director may, for
good cause shown, extend the time limit set forth in Subsection (5)(a) for an additional period
not to exceed 12 months.
(c) Notwithstanding Subsection (1)(t), a franchisor may own, operate, or control a new
powersport vehicle dealership trading in a line-make of powersport vehicle if:
(i) as to that line-make of powersport vehicle, there are no more than four franchised new
powersport vehicle dealerships licensed and in operation within the state as of January 1, 2002;
(ii) the franchisor does not own directly or indirectly, more than a 45% interest in the
dealership;
(iii) at the time the franchisor first acquires ownership or assumes operation or control of
the dealership, the distance between the dealership thus owned, operated, or controlled and the
nearest unaffiliated new powersport vehicle dealership trading in the same line-make is not less
than 150 miles;
(iv) all the franchisor's franchise agreements confer rights on the franchisee to develop
and operate as many dealership facilities as the franchisee and franchisor shall agree are
appropriate within a defined geographic territory or area; and
(v) as of January 1, 2002, no fewer than half of the franchisees of the line-make within
the state own and operate two or more dealership facilities in the geographic area covered by the
franchise agreement.
(6) Subsection (1)(ee)(ii) does not prohibit a promotional or incentive program that is
functionally available to all franchisees of the same line-make in the state on substantially
comparable terms.
(7) Subsection (1)(ee)(iii) may not be construed to:
(a) permit provision of or access to customer information that is otherwise protected
from disclosure by law or by contract between franchisor and a franchisee; or
(b) require a franchisor to disregard the preference of a potential customer in providing
or directing a lead, provided that the franchisor does not direct the customer to such a preference.
(8) Subsection (1)(ff) does not limit the right of an affiliate to engage in business
practices in accordance with the usage of trade in which the affiliate is engaged.
Amended by Chapter 268, 2005 General Session
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Last revised: Thursday, May 28, 2009