HAR §16-37-1. Definitions

Unless the context indicates otherwise, as used in these rules: "Bona fide wholesale transaction" means that in any determination as to whether a marketing plan or system of a manufacturer, licensor, or franchisor is a bona fide wholesale transaction or a series thereof, the director may consider, but not be limited to, the following: (1) Whether, in connection with an agreement to process, resell, or otherwise distribute a manufacturer’s or licensor’s product or service, consideration in purchase transactions thereunder is solely for the payments of goods, services, equipment, inventory, or real 37-1 §16-37-1 estate and such consideration does not reflect, in part or in whole, payment for the right to continue such purchase transactions or business whether on the same or different terms than those stated in the subject agreement. (2) Whether, in connection with an agreement to process, resell, or otherwise distribute a manufacturer’s or licensor’s product or service, a purchase of goods, services, equipment, inventory, or real estate is required. (3) Whether, in connection with an agreement to process, resell, or otherwise distribute a manufacturer’s or licensor’s product or service, the cost of goods, services, equipment, inventory, or real estate thereunder to the seller thereof is reasonably related to the price of the same to the distributor or licensee, taking into account the respective circumstances in the market of both the seller and buyer thereof. "Director" means the director of regulatory agencies. "Franchise fee" may be determined by the director to include, but not be limited to, the following: (1) Payment which is made before, upon, or after execution of an agreement to purchase, process, resell, or otherwise distribute a manufacturer’s or licensor’s goods, services, equipment, inventory, or real estate; and (2) Said payment is made in the form of a lump sum, installments, periodic royalties, profits, or cash flow, or is or may be reflected in the price of goods, services, equipment, inventory, or real estate sold by the licensor to the distributor or licensee. "Material event or material change" may be determined by the director to include, but not be limited to, the following: (1) The termination, closing, or failure to renew during any three- month period of: (A) The greater of one per cent or five of all franchises of a franchisor or subfranchisor regardless of location or (B) The lesser of fifteen per cent or two of the franchises of a franchisor or subfranchisor located in this State. (2) Any change in control, corporate name, or state of incorporation, or reorganization of the franchisor whether or not the franchisor or its parent, if the franchisor or subfranchisor is a subsidiary, is required to file reports under section 12 of the Securities Exchange Act of 1934. 37-2 §16-37-3 (3) The purchase by the franchisor in excess of five per cent of its existing franchises during any three-month period on a continuous basis. (4) The commencement of any new product, service, or model line involving, directly or indirectly, additional investment by any franchisee or the discontinuation or modification of the marketing plan or system of any product or service of the franchisor where the total sales from such product or service exceeds twenty per cent of the gross sales of the franchisor on an annual basis. "Net worth" shall include the excess of assets over liabilities which are recognized by generally accepted accounting principles consistently applied with the exception that: (A) Intangible assets in making the above computation shall include only the liquidation value of such intangibles, (B) Receivables of a franchisor due from its franchisees shall be stated with an appropriate asset offset or reserve for losses, and (C) Lump sum franchise fee receipts, or any portion thereof, shall include an appropriate offset under liabilities for accrued obligations to be performed in part or in whole as consideration for such fees. "The Act" means Act 18, Session Laws of Hawaii 1974, or chapter 482E, Hawaii Revised Statutes. [Eff. 1/1/75; am 3/30/79; am and ren §16-37-1, 7/30/81] (Auth: HRS §482E-8) (Imp: HRS §482E-2)