Ark. Code Ann. § 4-72-202 (2026)
Definitions
As used in this subchapter, unless the context otherwise requires:
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- “Franchise” means a written or oral agreement for a definite or indefinite period in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic within an exclusive or nonexclusive territory or to sell or distribute goods or services within an exclusive or nonexclusive territory at wholesale or retail, by lease agreement, or otherwise.
- However, a franchise is not created by a lease, license, or concession granted by a retailer to sell goods or furnish services on or from premises which are occupied by the retailer-grantor primarily for its own merchandising activities and a franchise is not created by door-to-door sales complying with § 4-89-101 et seq.;
- “Person” means a natural person, corporation, partnership, trust, or other entity, and, in case of an entity, “person” shall include any other entity which has a majority interest in such entity or effectively controls such other entity as well as the individual officers, directors, and other persons in active control of the activities of each entity;
- “Franchisor” means a person who grants a franchise to another person;
- “Franchisee” means a person to whom a franchise is offered or granted;
- “Sale, transfer, or assignment” means any disposition of a franchise or any interest therein, with or without consideration, to include, but not be limited to, a bequest, inheritance, gift, exchange, lease, or license;
- “Place of business” means a fixed geographical location at which the franchisee displays for sale and sells the franchisor's goods or offers for sale and sells the franchisor's services;
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“Good cause” means:
- Failure by a franchisee to comply substantially with the requirements imposed upon him or her by the franchisor, or sought to be imposed by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement; or
- The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise; or
- Voluntary abandonment of the franchise; or
- Conviction of the franchisee in a court of competent jurisdiction of an offense, punishable by a term of imprisonment in excess of one (1) year, substantially related to the business conducted pursuant to the franchise; or
- Any act by a franchisee which substantially impairs the franchisor's trademark or trade name; or
- The institution of insolvency or bankruptcy proceedings by or against a franchisee, or any assignment or attempted assignment by a franchisee of the franchise or the assets of the franchise for the benefit of the creditors; or
- Loss of the franchisor's or franchisee's right to occupy the premises from which the franchise business is operated; or
- Failure of the franchisee to pay to the franchisor within ten (10) days after receipt of notice of any sums past due the franchisor and relating to the franchise; and
- “Good faith” means honesty in fact in the conduct or transaction concerned.
History. Acts 1977, No. 355, § 2; 1979, No. 424, § 1; A.S.A. 1947, § 70-808; Acts 1991, No. 411, § 5; 1991, No. 760, § 1; 1997, No. 1128, § 1.
Publisher's Notes. The provisions of subdivision (7)(F) of this section may be in conflict with the federal bankruptcy laws.
Case Notes
Good Cause.
The defendant had good cause to cancel the plaintiff's franchise where the uncontroverted evidence adduced at trial showed that, on the date of the termination notice, the plaintiff's account was past due, and where the plaintiff further admitted that it did not repay any part of the amount owed within the ten-day grace period provided by the defendant. Heating & Air Specialists, Inc. v. Jones, 180 F.3d 923 (8th Cir. 1999).
Enumerated occurrences in the statute are the exclusive means by which a franchisor can terminate a franchise for “good cause.” Larry Hobbs Farm Equip., Inc. v. CNH Am., LLC, 375 Ark. 379, 291 S.W.3d 190 (2009).
Franchisee was entitled to relief in its action against a franchisor for violation of the Arkansas Franchise Practices Act because under subdivision (7) of this section, neither the market withdrawal of a product nor the withdrawal of a trademark or trade name for a product constituted “good cause” to terminate a franchise. Larry Hobbs Farm Equip., Inc. v. CNH Am., LLC, 375 Ark. 379, 291 S.W.3d 190 (2009).
Franchise.
Where the manufacturer's representative did not take title and possession of any of the manufacturer's products, and although the representative had some authority to negotiate price, he did not have an unqualified authorization to transfer the product at the point and moment of the agreement to sell, the representative was a promoter or solicitor of sales rather than an actual seller of goods; therefore, he did not have a cause of action based on the Franchise Practices Act. Kent Jenkins Sales, Inc. v. Angelo Bros. Co., 804 F.2d 482 (8th Cir. 1986).
The business relationship created by the contract between the parties was not a franchise where the plaintiff maintained no inventory, had no authority to set prices, and could not enter into a binding contract of insurance, and where his authority went no further than to solicit and procure applications for insurance. Stockton v. Sentry Ins., 337 Ark. 507, 989 S.W.2d 914 (1999).
Trial court properly determined that an insurance agent was not a franchisee under the Arkansas Franchise Practices Act, subdivision (1)(A) of this section, because the agent did not have the unqualified authority to sell policies or commit the insurance company to an insurance contract other than a temporary binder, which, by definition, could have been cancelled at any time at the discretion of the company. Gunn v. Farmers Ins. Exch., 2010 Ark. 434, 372 S.W.3d 346 (2010).
Place of Business.
A multi-county sales area was not a place of business at a fixed geographical location. Bridgman v. Cornwell Quality Tools Co., 831 F.2d 174 (8th Cir. 1987).
The Franchise Practices Act did not apply to an agreement between the parties whereby the plaintiff became an independent distributor for the defendant since no fixed geographical location for selling products or services was ever contemplated, much less required, by the parties' agreement. Mary Kay, Inc. v. Isbell, 338 Ark. 556, 999 S.W.2d 669 (1999), appeal dismissed, Isbell v. Mary Kay Cosmetics, 338 Ark. 580, 999 S.W.2d 673 (Ark. 1999).
Arkansas Franchise Practices Act, § 4-72-201 et seq., applied to protect a beverage distributor from the wrongful termination of its agreement by the manufacturer since the parties clearly contemplated that there would be a “place of business” in Arkansas and the distributor's planned satellite warehouse would have qualified as one under subdivision (6) as it would have had a telephone, forklift, the beverages for distribution, and personnel to run operations; further, the distributor already had an outlet for the beverages in Arkansas with a different beverage manufacturer. S. Beach Bev. Co. v. Harris Brands, Inc., 355 Ark. 347, 138 S.W.3d 102 (2003).
Cited: Chrysler Motors Corp. v. Thomas Auto Co., 939 F.2d 538 (8th Cir. 1991); Fisher v. Jones, 306 Ark. 577, 816 S.W.2d 865 (1991); Dr. Pepper Bottling Co. v. Frantz, 311 Ark. 136, 842 S.W.2d 37 (1992).