Small Business Franchise Act of 1998

Small Business Franchise Act of 1998 - Prohibits any person, in connection with the advertising, offering, sale, or promotion of any franchise, from: (1) employing a device, scheme, or artifice to defraud; (2) engaging in an act, practice, course of business, or pattern of conduct which operates or is intended to operate as a fraud upon any prospective franchisee; (3) obtaining property, or assisting others in so doing, by negligently making an untrue statement of a material fact or any failure to state a material fact; (4) discriminating among prospective franchisees on the basis of race, color, sexual orientation, sex, religion, disability, national origin, or age; or (5) making any claim or representation which is inconsistent with or contradicts a disclosure document. Requires the franchisor to provide a written statement specifying whether the franchise agreement contains a right of renewal.

(Sec. 4) Prohibits any franchisor or subfranchisor, in connection with the performance, enforcement, renewal, or termination of any franchise agreement, from: (1) engaging in an act, practice, course of business, or pattern of conduct which operates as a fraud upon any person; (2) discriminating among franchisees on the basis of race, color, sexual orientation, sex, religion, disability, national origin, or age; (3) hindering, prohibiting, or penalizing the free association of franchisees for any lawful purpose, including the formation of or participation in any trade association made up of franchisees; or (4) discriminating against a franchisee by imposing requirements not imposed on other similarly situated franchisees or otherwise retaliating against any franchisee for membership or participation in a franchisee association.

Prohibits a franchisor from: (1) terminating a franchise agreement prior to its expiration without good cause; or (2) prohibiting a franchisee from engaging in any business at any location after the expiration of a franchise agreement.

(Sec. 5) Sets forth provisions concerning: (1) minimum standards of conduct (good faith, due care, and limited fiduciary duty) for each party to a franchise agreement; (2) a prohibition against requiring the inclusion of a franchise agreement term or condition which violates this Act or relieves a person from a duty or liability under this Act; (3) a prohibition against the waiver from compliance with this Act; and (4) authorized legal actions by State attorneys general on behalf of State residents for alleged violations.

(Sec. 8) Authorizes a franchisee to assign a franchise interest to a transferee, provided such transferee satisfies reasonable qualifications applied by the franchisor in determining whether or not a current franchisee is eligible for renewal. Provides transfer conditions, including 30 days' prior written notice. Outlines events which shall not be considered transfers, such as successor management by a surviving heir or incorporation.

(Sec. 9) Prohibits a franchisor from transferring a franchise interest unless: (1) the franchisor provides 30 days prior notice to all franchisees of such intent; (2) the notice is accompanied by a complete description of the business and financial terms of the proposed transfer; and (3) upon such transfer, the transferee entity has the appropriate business experience and financial means to perform all of the franchisor's obligations.

(Sec. 10) Prohibits a franchisor from prohibiting a franchisee from obtaining equipment, fixtures, supplies, goods, or services (goods or services) used in the establishment or operation of the franchised business from sources of the franchisee's choosing, with the exception that such goods or services must meet reasonable quality standards promulgated or enforced by the franchisor. Requires the franchisor to: (1) provide and continuously update a list of approved vendors for such goods or services; and (2) report at least annually revenues and profits received from the sale of such goods or services to its franchisees.

(Sec. 11) Prohibits a franchisor from placing one or more new outlets of a franchised business within unreasonable proximity to an existing franchise, with an exception.

(Sec. 12) Sets forth provisions concerning: (1) legal actions brought by persons injured or damaged by violations; and (2) the right to arbitration, mediation, or other nonjudicial resolution in lieu of a legal action (with a statute of limitations).