Code of Virginia

Code of Virginia
7/23/2017

Virginia Petroleum Products Franchise Act

§ 59.1-21.8. Short title.

This chapter may be cited as the "Virginia Petroleum Products Franchise Act."

1973, c. 423.

§ 59.1-21.9. Findings of General Assembly.

The General Assembly finds and declares that since the distribution and sales through franchise arrangements of petroleum products in the Commonwealth of Virginia vitally affect the economy of the Commonwealth, the public interest, welfare, and transportation, and since the preservation of the rights, responsibilities, and independence of the small businesses in the Commonwealth is essential to economic vitality, it is necessary to define the relationships and responsibilities of the parties to certain agreements pertaining thereto. Consistent with these findings and declarations, the provisions of § 59.1-21.15:2, which do not relate to the termination or nonrenewal of petroleum franchises governed by federal law, advance the interests of the Commonwealth, and its citizens, by facilitating the purchase of retail service stations by their occupying lessee-franchisees, thereby insuring the motoring public greater access to service stations and petroleum products and furthering a more dynamic and full-service-oriented retail marketplace, while also considering the interests of the franchisor and, if applicable, the property owner, with regard to such service station premises.

1973, c. 423; 1990, c. 907; 2014, c. 222.

§ 59.1-21.10. Definitions.

As used in this chapter, the following terms shall have the following meanings unless the context requires otherwise:

"Dealer" means any person who purchases motor fuel for sale to the general public for ultimate consumption. "Dealer" shall not mean any person, including any affiliate of such person, who (i) purchases motor fuel for sale, consignment, or distribution to another; (ii) receives motor fuel on consignment for consignment or distribution to his own motor fuel accounts or to accounts of his supplier; or (iii) who is an employee of, or merely serves as a common carrier providing transportation service, for such person.

"Designated family member" means the adult spouse, adult child or stepchild, or adult brother or sister of the dealer who is designated in the franchise agreement as the successor to the dealer's interest under the agreement and who shall become the dealer upon the completion of the succession.

"Franchise" or "franchise agreement" means any agreement, express or implied, between a refiner and a dealer under which a refiner authorizes or permits a dealer to use, in connection with the sale, consignment, or distribution of motor fuel, a trademark which is owned or controlled by such refiner. "Franchise" or "franchise agreement" shall also mean any agreement, express or implied, under which a dealer is granted the right to occupy leased marketing premises, which premises are to be employed in connection with the sale, consignment, or distribution of motor fuel under a trademark which is owned or controlled by such refiner.

"Franchise fee" means any fee or charge that a dealer is required to pay or agrees to pay for the right to enter into a franchise agreement or to become a dealer at the premises to which the franchise agreement relates. The term "franchise fee" shall not include reasonable actual costs and expenses incurred by the refiner in effecting the assignment, transfer, or sale.

"Franchisor" means a refiner who authorizes or permits, under a franchise, a dealer to use a trademark in connection with the sale, consignment, or distribution of motor fuel.

"Jobber/distributor" means any person, including any affiliate of such person, who (i) purchases motor fuel for sale, consignment, or distribution to another; or (ii) receives motor fuel on consignment for consignment or distribution to his own motor fuel accounts or to accounts of his supplier, but shall not include a person who is an employee of, or merely serves as a common carrier providing transportation service for, such supplier.

"Newly remodeled facility" means a retail outlet, marketing premises, or leased marketing premises which, within an 18-month period, has been rebuilt, renovated, or reconstructed at a cost of (i) for facilities remodeled before January 1, 2004, a minimum of $560,000; or (ii) for facilities remodeled on or after January 1, 2004, a minimum of $560,000 plus an amount reflecting the annual rate of inflation, such amount to be calculated on January 1 of each year by the Commissioner of the Department of Agriculture and Consumer Services by referring to the Consumer Price Index published by the United States Department of Labor, Bureau of Labor Statistics.

"Operation of a retail outlet" means the ownership or option to buy a properly zoned parcel of property for which a permit to build a retail outlet has been granted.

"Petroleum products" or "motor fuel" means gasoline and diesel fuel of a type distributed for use as a fuel in self-propelled vehicles designed primarily for use on public streets, roads, and highways.

"Profit" means the net gain, for income tax purposes, realized by the dealer upon the assignment, transfer, or sale of the franchise agreement.

"Refiner" means any person engaged in the refining of crude oil to produce motor fuel and includes any affiliate of such person.

"Retail" means the sale of petroleum products for purposes other than resale.

"Retail outlet," "marketing premises," or "leased marketing premises" means the premises at which petroleum products are sold to the general public.

"Trial franchise" means the same as provided in the Petroleum Marketing Practices Act (15 U.S.C. § 2803 et seq.).

1973, c. 423; 1979, c. 306; 1990, c. 907; 2003, c. 410; 2005, c. 839; 2012, c. 351.

§ 59.1-21.11. Required provisions pertaining to agreements between refiners and dealers.

Every agreement between a refiner and a dealer shall be subject to the following provisions, whether or not expressly set forth therein:

1. The dealer shall not be required to keep his retail outlet open for business for more than sixteen consecutive hours per day, nor more than six days per week. This subdivision shall not be construed to prevent any retail outlet being open when required to be open to conform to any local, state or federal law or regulation, nor shall this subdivision be construed to prevent any retail outlet from being open for business for more than sixteen consecutive hours per day or more than six days per week when the dealer determines that market conditions warrant such operation. This subdivision shall not apply to retail outlets which participate in the travel services signing program of the Virginia Department of Transportation.

2. The right of either party to trial by jury or to the interposition of counterclaims or cross claims shall not be waived.

3. In the absence of any express agreement, the dealer shall not be required to participate financially in the use of any premium, coupon, give-away, or rebate in the operation of a retail outlet. The refiner may require the dealer to distribute to customers premiums, coupons, or give-aways which are furnished to the dealer at the expense of the refiner.

4. No agreement or franchise subject to the provisions of this chapter shall limit, restrict, or impair the number of retail outlets which an individual dealer may operate for the same refiner, nor may any agreement or franchise establish working hours for the dealer. However, an agreement or franchise may require the dealer to be involved in the operation of the business of the dealer's retail outlet or retail outlets for not more than an average of sixty hours per month. Notwithstanding the provisions of this subdivision, a refiner may impose a requirement in a trial franchise only, that a dealer be on the marketing premises of the dealer's retail outlet or retail outlets for a reasonable number of hours per week not to exceed twenty hours per week.

5. No transfer or assignment of a franchise by a dealer to a qualified transferee or assignee shall be unreasonably disapproved by the refiner. A refiner shall have forty-five days, after the date of submission by a proposed transferee or assignee of all personal and financial information required by the refiner's reasonable and uniform standards, within which to notify a dealer in writing that a proposed transferee or assignee meets or fails to meet the refiner's reasonable and uniform qualifications. If the proposed transferee or assignee fails to meet the refiner's reasonable and normal qualifications, the notice to the dealer shall state with specificity the reasons for such failure.

6. The term of the initial agreement between the refiner and the dealer relating to specific marketing premises shall not be less than one year; the term of all subsequent agreements between the refiner and the dealer, relating to the same marketing premises, shall not be for less than three years. The rental provisions in any such agreement or franchise shall be based on commercially fair and reasonable standards, uniformly applied to all similarly situated dealers of the same refiner in the same geographic area.

7. A refiner may require a dealer to pay a fee or charge for the privilege of honoring a credit card issued by the refiner and used by customers of the dealer in purchasing at retail products and services at retail outlets which bear the brand name or trademark of the refiner only if such refiner has deducted the cost of extending retail credit from the tankwagon price charged dealers, has notified the dealer in writing of such deduction and such fee is a part of a program designed (i) to induce retail purchases for cash or (ii) to separate the cost of extending retail credit from the tankwagon price paid by the dealer. The amount of any such fee or charge shall be directly related to the actual cost incurred by the refiner in the extension of retail credit. Notwithstanding the provisions of subsection A of § 59.1-21.12, any refiner who violates the provisions of this subdivision shall be civilly liable for damages in treble the amount of the damages sustained by the complaining party as a result of the violation.

8. A dealer shall have the right, effective upon his death, permanent and total disability, or retirement, to have his interests under a franchise agreement with a refiner assigned to a designated family member who has been approved by the refiner in accordance with the refiner's reasonable and uniform standards for personal and financial condition unless the refiner shows that the designated family member no longer meets the reasonable and uniform standards at the time of the previous approval. All franchise agreements shall contain a provision identifying the designated family member who is entitled to succeed to the interests of the dealer under the agreement upon his death, permanent and total disability, or retirement. The foregoing shall not prohibit a refiner from requiring that the designated family member accept a trial franchise within twenty-one days of the dealer's death, permanent and total disability, or retirement and that the designated family member attend a training program offered by the refiner.

A dealer and the refiner may mutually agree to change the designated family member entitled to succeed to the dealer's interests under a franchise agreement. The designated family member shall provide, upon the request of the refiner, personal and financial information that is reasonably necessary to determine whether the succession should be honored. The refiner shall not be obligated to accept a designated family member under this subdivision who does not meet the reasonable and uniform standards uniformly imposed by the refiner; however, any refusal to accept the designated family member as a successor dealer shall be given by the refiner in writing to the dealer, not later than ninety days after the date of the designation of the designated family member by the dealer, and shall state with specificity the reasons for such refusal.

9. a. No refiner shall condition approval of an assignment, transfer, sale, or renewal of a franchise agreement on the payment by the dealer, or the proposed successor dealer, of a franchise fee or penalty unless the assignment, transfer, or sale is of a franchise agreement covering a new or newly remodeled facility.

b. A refiner may require a dealer to pay a franchise fee or penalty, as hereinafter provided, upon the assignment, transfer, or sale of a franchise agreement covering a new facility within the first three years of the initial term of the franchise agreement, or upon the assignment, transfer or sale of a franchise agreement covering a newly remodeled facility within the first three years after the completion of the remodeling:

(1) An amount not to exceed sixty percent of the profit realized by the dealer if the assignment, transfer, or sale takes place within the first twelve-month period.

(2) An amount not to exceed twenty-five percent of the profit realized by the dealer if the assignment, transfer, or sale takes place within the second twelve-month period.

(3) An amount not to exceed ten percent of the profit realized by the dealer if the assignment, transfer, or sale takes place within the third twelve-month period.

c. Nothing in this section shall authorize a refiner to impose a franchise fee or penalty upon an assignment, transfer, or sale to a family member pursuant to subdivision 8 of this section.

d. In the case of a new facility, a franchise fee may be charged at the time the first franchise agreement is entered into.

10. Any provision in any agreement or franchise purporting to waive any right or remedy under this chapter or any applicable provisions of the Petroleum Marketing Practices Act (15 U.S.C. § 2802 et seq.) shall be null and void.

1973, c. 423; 1979, c. 306; 1982, c. 350; 1985, c. 498; 1987, c. 535; 1990, c. 907; 1991, c. 199.

§ 59.1-21.11:1. Waiver of constitutional rights prohibited.

Any provision in any agreement or franchise subject to the provisions of this chapter purporting to waive or to directly or indirectly limit the constitutional rights of a dealer (i) to petition any governmental authority or body or (ii) lawfully to seek or oppose any governmental or regulatory action with respect to any matter, notwithstanding any contrary position taken by the franchisor thereon, shall be null and void.

1994, c. 170.

§ 59.1-21.12. Civil action for violation of chapter.

A. Any person who violates any provision of this chapter shall be civilly liable for liquidated damages of $10,000 and reasonable attorney's fees, plus provable damages caused as a result of such violation, and be subject to such other remedies, legal or equitable, including injunctive relief, as may be available to the party damaged by such violation. Such action shall be brought in the circuit court of the jurisdiction wherein the franchised premises are located. For the purposes of subdivisions 5 and 9 of § 59.1-21.11, a proposed transferee, assignee, or designated family member who is not approved as a dealer by a refiner shall have legal standing to challenge a refiner's compliance with the provisions of this section relating to assignment.

B. No action may be brought under the provisions of this chapter for a cause of action which arises more than two years prior to the date on which such action is brought.

1973, c. 423; 1990, c. 907; 2003, c. 410.

§ 59.1-21.13. Obligation of refiner to repurchase upon termination, etc., of agreement.

In the event of any termination, cancellation, or failure to renew whether by mutual agreement or otherwise, a refiner shall make or cause to be made a good faith offer to repurchase from the dealer, his heirs, successors, and assigns, at the current wholesale prices any and all merchantable products purchased by such dealer from the refiner; provided, that in such event the refiner shall have the right to apply the proceeds against any existing indebtedness owed to him by the dealer; and provided further, that such repurchase obligation is conditioned upon there being no other claims or liens against such products by or on behalf of other creditors of the dealer.

1973, c. 423; 1979, c. 306; 1990, c. 907.

§ 59.1-21.14. Producer or refiner not to terminate, etc., agreement without notice and reasonable cause; nonrenewal by franchisor.

A. A producer or refiner shall not terminate, cancel, or fail to renew a petroleum products franchise unless he furnishes prior written notification pursuant to this paragraph to each dealer affected thereby. Such notification shall contain a statement of intention to terminate, cancel, or not renew with the reasons therefor; the date on which such action shall take effect; and shall be sent to such dealer by certified mail not less than sixty days prior to the date on which such petroleum products franchise will be terminated, canceled, or not renewed. In circumstances where it would not be reasonable to provide advance notice of sixty days, the producer or refiner shall provide notice at the earliest date as is reasonably practicable. Termination, cancellation, or failure to renew shall be effective immediately upon notice given by certified mail to the dealer at his last known address in situations involving:

1. Failure of the dealer to open for business during reasonable business hours for five consecutive days, or

2. Criminal conduct or violations of law by the dealer involving moral turpitude, or

3. Bankruptcy, an assignment for the benefit of creditors by the dealer, or a petition for reorganization by the dealer, or

4. Condemnation or other taking of the premises, in whole or in part, pursuant to the power of eminent domain, or

5. Mutual agreement of the parties to terminate the franchise, or

6. Death, incapacity, or permanent and total disability of the dealer.

B. A producer or refiner shall not terminate, cancel, or fail to renew, a petroleum products franchise, except for reasonable cause.

C. Reasonable cause shall include, but not be limited to:

1. A failure of the dealer to comply substantially with the express provisions of such petroleum products franchise, or

2. A failure of the dealer to act in good faith in carrying out the terms of such petroleum products franchise, and federal and state laws, which shall include, but not be limited to:

(a) Adulteration of the producer's or refiner's products, or

(b) Misbranding of gasoline, or

(c) Misleading or deceiving consumers, or

(d) Trademark violations, or

(e) False or deceptive representations to the producer or refiner, or

3. Receipt and documentation by the supplier of repeated customer complaints uncorrected by the dealer within a reasonable time, or

4. A total withdrawal by the producer or refiner from the sale of motor fuels in commerce for sale in the county, city or standard statistical metropolitan area in which the franchise is situated, or

5. The occurrence of any of the situations set out in subsection A hereof, not requiring sixty days' notice.

D. A franchisor may elect not to renew a franchise which involves the lease by the franchisor to the franchisee of premises, in the event the franchisor:

1. Sells or leases such premises to other than a subsidiary or affiliate of the franchisor for any use; or

2. Sells or leases such premises to a subsidiary or affiliate of the franchisor, except such subsidiary or affiliate shall not use such premises for the retail sale of motor fuels; or

3. Converts such premises to a use other than the retail sale of motor fuels; or

4. Has leased such premises from a person not the franchisee and such lease is terminated, canceled or not renewed; or

5. Determines, in the case of any retail service station opened after July 1, 1979, under a franchise term of at least three years, in good faith and in the normal course of business that renewal of the petroleum products franchise is likely to be uneconomical to the producer or refiner despite any reasonable changes or reasonable additions to the provisions of the franchise which may be acceptable to the dealer.

E. The provisions of this section shall apply to any petroleum products franchise entered into or renewed on and after July 1, 1976.

1973, c. 423; 1976, c. 645; 1979, c. 306; 1997, c. 801.

§ 59.1-21.15. Disclosures to be made by refiner before conclusion of agreement.

A refiner shall disclose to any prospective dealer the following information, before any franchise agreement is concluded:

1. The gallonage volume history, if any, of the location under negotiation for and during the three-year period immediately past or for the entire period which the location has been supplied by the refiner, whichever is shorter.

2. The name and last known address of the previous dealer or dealers for the last three years, or for and during the entire period which the location has been supplied by the refiner, whichever is shorter.

3. Any legally binding commitments for the sale, demolition, or other disposition of the location.

4. The training programs, if any, and the specific goods and services the refiner will provide for and to the dealer.

5. Full disclosure of any and all obligations which will be required of the dealer.

6. Full disclosure of all restrictions on the sale, transfer, and termination of the agreement.

1973, c. 423; 1979, c. 306; 1990, c. 907.

§ 59.1-21.15:1. Continued rights of dealers upon sale or assignment of franchise agreement.

Any franchise between a dealer and a refiner located in Planning District 8 in effect on or after January 1, 2008, which franchise is sold or assigned to a third party shall require such acquiring third party, and its successors, assigns, affiliates and subsidiaries, to comply with, provide, grant, and make available to the dealer and to any successor of the dealer any and all rights, privileges, or protections provided for in this chapter and required of or enforceable against the assigning refiner-franchisor except for such sale or assignment. With respect to the requirements of § 59.1-21.16:2, the one and one-half mile restriction shall only apply to a franchise location which is sold or assigned on or after January 1, 2008.

2008, c. 837.

§ 59.1-21.15:2. Franchisor's obligation to offer leased marketing premises to occupying dealer.

A. As used in this section, unless the context requires otherwise:

"Bona fide offer" means an offer by the franchisor to the dealer that approximates the fair market value of the leased marketing premises under an objectively reasonable analysis, and:

1. In the case of the franchisor offering to the dealer a right of first refusal regarding an offer to purchase the marketing premises that has been made to the franchisor by a third party regarding the leased marketing premises, the offer made by such third party shall be a bona fide offer acceptable to the franchisor, and may not be an offer that has been unfairly or improperly established by either the franchisor or the third party offer; or

2. In the case of service station premises that the franchisor leases from a third party, and providing the lease allows the assignment of such lease by the franchisor, the franchisor's lease rights in the station premises shall be transferred or assigned to the dealer, with the franchisor making a bona fide offer with regard to the sale of structures located on the station's premises, including all pumps, dispensers, storage tanks, piping, and all other equipment located upon the premises necessary for the continued operation of a service station.

If the leased marketing premises occupied by a dealer are to be part of a sale of multiple properties owned or controlled by the franchisor, a bona fide offer shall reasonably allocate a portion of the total price for the multiple properties intended to be sold to the leased marketing premises occupied by the dealer in order to allow the dealer to exercise the dealer's right of first refusal regarding the leased marketing premises occupied by the dealer. In making such allocation, the purpose shall be to determine the fair market value of the leased marketing premises under an objectively reasonable analysis.

A bona fide offer shall (i) include the sale of all structures located on the leased marketing premises, including all pumps, dispensers, storage tanks, piping, and all other equipment located upon the premises necessary for the continued operation of a service station if the dealer exercises the dealer's right to buy; (ii) not include a requirement that the dealer enter into a supply agreement with the selling franchisor or with any other party and, to the extent that a bona fide offer acceptable to the franchisor from a third party contains such a supply agreement, it shall not be applicable to the dealer; and (iii) not, unless freely negotiated by the dealer, release the continuing obligations of the franchisor with regard to any environmental obligations regarding the service station premises nor require the dealer to assume such obligations of the franchisor with regard to the dealer's purchase of the premises or acquisition of the franchisor's rights in the premises. In conjunction with the dealer's acquisition of the rights of the franchisor in the leased marketing premises, such environmental tests, surveys, and other due diligence investigations shall be conducted as are customary in such transactions.

"Leased marketing premises" means marketing premises owned, leased, or controlled by a franchisor and that the dealer is authorized or permitted, under the petroleum franchise, to employ, to occupy, or both in connection with the sale, consignment, or distribution of petroleum products.

"Supply agreement" means an agreement, oral or written, under which a party is to supply, and a dealer is required to buy, petroleum products.

B. In the case of leased marketing premises owned by a franchisor, or in which a franchisor owns a leasehold interest, which premises are occupied by a dealer, the franchisor shall not sell, transfer, or assign to another person the franchisor's interest in the premises unless the franchisor has first either made a bona fide offer to sell, transfer, or assign to the dealer the franchisor's interest in the premises, other than signs displaying the refiner's insignia and any other trademarked, service marked, copyrighted, or patented items of the franchisor, or, if applicable, offered to the dealer a right of first refusal of any bona fide offer acceptable to the franchisor made by another person to acquire the franchisor's interest in the premises.

C. Nothing in this section shall be deemed to require a franchisor to continue an existing franchise relationship, or to renew a franchise relationship, if not otherwise required by federal law.

D. Nothing in this section shall be deemed to require a franchisor to continue to supply petroleum products to a dealer if the dealer exercises its right to acquire the interests of the franchisor in the premises.

E. The bona fide offer required to be made to the dealer by the franchisor shall:

1. Be in writing;

2. Set forth fully and completely all terms and conditions of the offer being made by the franchisor;

3. In the case of a bona fide offer being made by a third party to acquire the interests of the franchisor in the property, which offer is acceptable to the franchisor, also contain a full copy of the proposal of the third party, or the contract or its equivalent between the franchisor and the third party if such a contract exists, to include all schedules, attachments, addenda, or their equivalent; and

4. In the case of leased marketing premises that the franchisor leases from a third party or parties, also contain a full copy of the underlying lease, including all schedules, attachments, addenda, or their equivalent.

F. After receipt of the bona fide offer from the franchisor, the dealer shall have a period of not less than 60 days within which to exercise the dealer's rights as established under this section, which exercise shall be effective upon delivering written notice of such exercise to the franchisor. After exercise of the dealer's rights, the closing on, and transfer of, the leased marketing premises shall occur (i) within 60 days after the dealer's exercise of such rights or (ii) on or before the closing date established within the bona fide offer regarding which the dealer has exercised the dealer's right of first refusal under this section, whichever date occurs later.

G. The provisions of this section shall apply only to the sale, assignment, or transfer of a franchisor's interest in or to any leased marketing premises located only in Planning District 8, and shall not apply to leased marketing premises owned or controlled by a jobber/distributor.

2014, c. 222.

§ 59.1-21.16. Authority of Attorney General under § 59.1-68.2 not limited.

Nothing in this chapter shall be construed as limiting the authority of the Attorney General under the provisions of § 59.1-68.2.

1973, c. 423.

§ 59.1-21.16:1. Expired.

Expired.

§ 59.1-21.16:2. Operation of retail outlet by refiner; apportionment of fuels during periods of shortage; rules and regulations.

A. After July 1, 1979, no refiner of petroleum products shall operate any major brand, secondary brand, or unbranded retail outlet in the Commonwealth of Virginia with company personnel, a parent company, or under a contract with any person, firm, or corporation, managing a service station on a fee arrangement with the refiner; however, such refiner may operate such retail outlet with the aforesaid personnel, parent, person, firm, or corporation if such outlet is located not less than one and one-half miles from the nearest retail outlet operated by any dealer or jobber/distributor, as measured by the most direct surface transportation route from the gas pump at the refiner's facility that is nearest a gas pump at the dealer's or jobber/distributor's facility; and provided, that once in operation, no refiner shall be required to change or cease operation of any retail outlet by the provisions of this section.

During the period July 1, 1990, through June 30, 1991, no refiner may construct and operate with company personnel as defined in this section any new major brand, secondary brand, or unbranded retail outlet in the Commonwealth of Virginia, except on any property purchased or under option to purchase by March 1, 1990.

B. Every refiner of petroleum products shall apportion all gasoline and diesel fuel among their purchasers during periods of shortages on an equitable basis.

C. No new lease, lease renewal, new supply contract, or new supply contract renewal under this chapter shall impose purchase or sales quotas.

D. The provisions of this section shall not be applicable to retail outlets operated by producers or refiners on July 1, 1979.

1979, c. 306; 1984, c. 720; 1990, c. 907; 1995, c. 664; 2003, c. 410; 2012, c. 351.

§ 59.1-21.17. Effective date of chapter.

The provisions of this chapter shall be applicable to franchise agreements entered into on and after July 1, 1973.

1973, c. 423.

§ 59.1-21.18. Repealed.

Repealed by Acts 2015, c. 709, cl. 2.

§ 59.1-21.18:1. Exclusions.

Franchise agreements subject to the provisions of this chapter shall not be subject to any requirement contained within Chapter 8 (§ 13.1-557 et seq.) of Title 13.1.

1978, c. 670.

The chapters of the acts of assembly referenced in the historical citation at the end of these sections may not constitute a comprehensive list of such chapters and may exclude chapters whose provisions have expired.

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