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Gas Station Franchisees and the Federal Petroleum Marketing Practices Act

Many gas stations are oil company franchises. Typically, the oil company owns the station and leases the premises to the franchisee under an agreement that calculates rent as a percentage of sales. In other cases, an individual owns the station premises and purchases gasoline from the refiner under a franchise agreement.

Understanding the Federal Petroleum Marketing Practices Act

Gas station franchisees enjoy protection from termination without cause and non-renewal, in certain circumstances, under the Federal Petroleum Marketing Practices Act.

If the franchisor or refiner tries to terminate the relationship without good cause, the franchisee may obtain an injunction in federal court against termination. Good cause means that the franchisee has not complied with the terms of the agreement or has committed other acts that injure the franchisor.

Non-renewal of a franchise

Non-renewal of a franchise at the end of its term is more complicated. When an individual owns the station, in certain circumstances, the franchisor must offer to buy the franchisee out at a fair price. When a refiner owns the station, the franchisee has the opportunity to purchase the premises from the franchisor. This allows franchisors to cease operations in an area if they are withdrawing from that market. Franchisors may also sell their operations to another oil company and transfer the franchises to the buyer.

States laws may offer additional protection

In addition to federal laws, some states have laws that protect gas station franchisees, but the prevailing rules under the Petroleum Marketing Practices Act usually govern.

If a franchisor or refiner tries to terminate your gas station franchise without good cause, be sure to discuss your situation with a franchise lawyer.

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