The Vermont Statutes Online

Title 7: Alcoholic Beverages, Cannabis, and Tobacco

Chapter 023: Beer and Wine Franchises

• Subchapter 001: GENERAL PROVISIONS

• § 701. Definitions

  Except as otherwise provided pursuant to section 752 of this chapter, as used in this chapter:

  (1) “Certificate of approval” means an authorization by the Board of Liquor and Lottery pursuant to section 274 of this title to a manufacturer or distributor of malt beverages, vinous beverages, or ready-to-drink spirits beverages not licensed under the provisions of this title, to sell those beverages to holders of a packager’s or wholesale dealer’s license issued by the Board pursuant to section 272 or 273 of this title.

  (2) “Franchise” or “agreement” means one or more of the following:

  (A) a commercial relationship between a wholesale dealer and a certificate of approval holder or a manufacturer of a definite duration or indefinite duration that is or is not in writing and has been in existence for at least one year;

  (B) a relationship that has been in existence for at least one year in which the wholesale dealer is granted the right to offer and sell the brands of malt beverages, vinous beverages, or ready-to-drink spirits beverages offered by the certificate of approval holder or manufacturer;

  (C) a relationship that has been in existence for at least one year in which the wholesale dealer, as an independent business, constitutes a component of a certificate of approval holder’s or manufacturer’s distribution system;

  (D) a relationship that has been in existence for at least one year in which the wholesale dealer’s business is substantially associated with the certificate of approval holder’s or manufacturer’s brand, advertising, or other commercial symbol designating the manufacturer;

  (E) a relationship that has been in existence for at least one year in which the wholesale dealer’s business is substantially reliant on the certificate of approval holder or manufacturer for the continued supply of malt beverages, vinous beverages, or ready-to-drink spirits beverages; or

  (F) a written or oral arrangement for a definite or indefinite period that has been in existence for at least one year in which a certificate of approval holder or manufacturer grants to a wholesale dealer a license to use a trade name, trademark, service mark, or related characteristic, and in which there is a community of interest in the marketing of goods or services at wholesale, retail, by lease, or otherwise.

  (3) “Franchisee” means any malt beverages, vinous beverages, or ready-to-drink spirits beverages wholesale dealer to whom a franchise or agreement as defined in this section is granted or offered, or any malt beverages, vinous beverages, or ready-to-drink spirits beverages certificate of approval holder or manufacturer who is a party to a franchise or agreement as defined in this section.

  (4) “Franchisor” means any malt beverages, vinous beverages, or ready-to-drink spirits beverages certificate of approval holder or manufacturer who enters into any franchise or agreement with a malt beverages or vinous beverages wholesale dealer, or any malt beverages or vinous beverages certificate of approval holder or manufacturer who is a party to a franchise or agreement as defined in this section.

  (5) “Territory” or “sales territory” means the area of sales responsibility designated by any agreement or franchise between any franchisee or franchisor for the brand or brands of any franchisor or manufacturer.

  (6) “Brand” and “brands” are synonymous with label and labels.

  (7) “Wholesale dealer” means a packager licensed pursuant to section 272 of this title or a wholesale dealer licensed pursuant to section 273 of this title. (Added 1975, No. 199 (Adj. Sess.); amended 1983, No. 197 (Adj. Sess.), § 1; 2017, No. 83, § 121; 2017, No. 145 (Adj. Sess.), § 2, eff. Jan. 1, 2019; 2018, No. 1 (Sp. Sess.), § 81; 2021, No. 177 (Adj. Sess.), § 31, eff. July 1, 2022.)

• § 702. Prohibited acts by manufacturer or certificate of approval holder

  A manufacturer or certificate of approval holder shall not do any of the following:

  (1) Induce or coerce, or attempt to induce or coerce, any wholesale dealer to accept delivery of any alcoholic beverage, any form of advertisement, or any other commodity, that was not ordered by the wholesale dealer.

  (2) Induce or coerce, or attempt to induce or coerce, any wholesale dealer to do any illegal act or thing by threatening to cancel or terminate the wholesale dealer’s malt beverages, vinous beverages, or ready-to-drink spirits beverages franchise agreement.

  (3) Fail or refuse to deliver promptly to a wholesale dealer after the receipt of its order any malt beverages, vinous beverages, or ready-to-drink spirits beverages when the product is available for immediate sale. If a manufacturer or certificate of approval holder believes in good faith that it does not have a sufficient amount of a product available for immediate sale to satisfy the demand of a wholesale dealer and its other customers, it shall allocate the available product between the wholesale dealer and its other customers in a fair and equitable manner.

  (4) Require a wholesale dealer to agree to any condition, stipulation, or provision limiting the wholesale dealer’s rights to sell the product of another manufacturer or certificate of approval holder. (Added 1975, No. 199 (Adj. Sess.); amended 1983, No. 197 (Adj. Sess.), § 2; 2017, No. 83, § 122; 2017, No. 145 (Adj. Sess.), § 3, eff. Jan. 1, 2019; 2021, No. 177 (Adj. Sess.), § 32, eff. July 1, 2022.)

• § 703. Cancellation of franchise

  Notwithstanding the terms, provisions, or conditions of any agreement or franchise, no certificate of approval holder or manufacturer shall cancel, terminate, or refuse to continue a franchise, or cause a wholesale dealer to relinquish a franchise, unless good cause is shown to exist. (Added 1975, No. 199 (Adj. Sess.); amended 1983, No. 197 (Adj. Sess.), § 3; 2017, No. 83, § 123.)

• § 704. 120 days’ notice for cancellation; rectification

  (a)(1) Except as provided in subsection (c) of this section, a certificate of approval holder or manufacturer shall provide a franchisee or agreement holder at least 120 days’ written notice of any intent to terminate or cancel any franchise or agreement.

  (2) The notice shall state the causes and reasons for the intended termination or cancellation. The franchisee shall have 120 days in which to rectify any claimed deficiency.

  (b) The Superior Court, upon petition and after due notice to both parties and the opportunity to be heard, shall decide whether good cause exists to allow termination or cancellation of the franchise or agreement.

  (c) The notice provisions of subsection (a) of this section may be waived if the reason for termination, cancellation, or nonrenewal is insolvency, the occurrence of an assignment for the benefit of creditors, bankruptcy, or if the certificate of approval holder or manufacturer is able to prove to the court that providing the required notice would do irreparable harm to the marketing of its product. (Added 1975, No. 199 (Adj. Sess.); amended 1983, No. 197 (Adj. Sess.), § 4; 2017, No. 83, § 124.)

• § 705. Exclusive territories

  No certificate of approval holder or manufacturer who designates a sales territory for which a wholesale dealer shall be primarily responsible or in which a wholesale dealer is required to concentrate its efforts shall enter into any franchise or agreement with any other wholesale dealer for the purpose of establishing an additional franchisee for its brand or brands of malt beverages, vinous beverages, or ready-to-drink spirits beverages in the territory being primarily served or concentrated upon by the first licensed wholesale dealer. (Added 1975, No. 199 (Adj. Sess.); amended 1983, No. 197 (Adj. Sess.), § 5; 2017, No. 83, § 125; 2021, No. 177 (Adj. Sess.), § 33, eff. July 1, 2022.)

• § 706. Sale to retailers by franchisees

  No franchisee that is granted a sales territory for which the franchisee shall be primarily responsible or in which the franchisee is required to concentrate its efforts shall make any sale or delivery of malt beverages, vinous beverages, or ready-to-drink spirits beverages to any retail licensee whose place of business is not within the sales territory granted to the franchisee. (Added 1975, No. 199 (Adj. Sess.); amended 2017, No. 83, § 126; 2021, No. 177 (Adj. Sess.), § 34, eff. July 1, 2022.)

• § 707. Sale or transfer; purchase by manufacturer

  (a) A wholesale dealer wishing to sell or otherwise transfer its interests in a franchise shall give at least 90 days’ written notice to the certificate of approval holder or manufacturer, prior to the sale or transfer. The notice of intended sale or transfer shall give the full name and address of the proposed transferee, along with full details outlining the qualifications of the proposed transferee that, in the opinion of the wholesale dealer, make the proposed transferee competent to operate the franchise.

  (b) In the event the certificate of approval holder or manufacturer wishes to resist the proposed sale or transfer to the proposed transferee, the certificate of approval holder or manufacturer shall petition the Superior Court for a hearing not later than 60 days prior to the date of the proposed sale or transfer. The petition shall clearly state the certificate of approval holder’s or manufacturer’s reasons for resisting the proposed sale or transfer.

  (c) Upon receipt of a petition brought resisting a sale or transfer, the Superior Court shall hold a hearing on the proposed transfer or sale. The court shall make a full inquiry into the qualifications of the proposed transferee and shall determine whether or not the proposed transferee is in a position to substantially continue the operations of the franchise, to assume the obligations of the franchise holder, and to conduct the business in a manner that will protect the legitimate interests of the certificate of approval holder or manufacturer.

  (d) If the Superior Court finds the proposed transferee to be qualified to operate the franchise, it shall approve the transfer of the franchise to the proposed transferee.

  (e) The provisions of subsections (b) through (d) of this section shall not apply to the sale or transfer of a franchise to the spouse, child, grandchild, sibling, parent, foster child, child-in-law, sibling-in-law, niece, or nephew of the owner of the wholesale dealer. (Added 1975, No. 199 (Adj. Sess.); amended 1983, No. 197 (Adj. Sess.), § 6; 2017, No. 83, § 127; 2017, No. 145 (Adj. Sess.), § 4, eff. Jan. 1, 2019; 2021, No. 105 (Adj. Sess.), § 152, eff. July 1, 2022.)

• § 708. Merger of franchisor

  Once a franchise has been in effect for a period of one year, the merger of the franchisor and a third party shall not void the franchise unless a waiver is received from the franchisee or unless good cause is shown pursuant to section 703 of this title and in accordance with the procedures established in section 704 of this title. (Added 1983, No. 197 (Adj. Sess.), § 8; amended 2017, No. 83, § 128.)

• § 709. Heirs, successors, and assigns

  The provisions of this chapter shall apply to the heirs, successors, and assigns of any franchisor or franchisee. (Added 1983, No. 197 (Adj. Sess.), § 9; amended 2017, No. 83, § 129.)

• § 710. Redesignated. 2017, No. 83, § 129.

• Subchapter 002: SMALL MANUFACURERS AND CERTIFICATE OF APPROVAL HOLDERS

• § 751. Application

  (a) The provisions of this subchapter shall apply to any franchise between a wholesale dealer and either:

  (1) a certificate of approval holder that produces or distributes a total annual volume of not more than 50,000 barrels of malt beverages and whose products comprise three percent or less of the wholesale dealer’s total annual sales of malt beverages by volume; or

  (2) a manufacturer that produces a total annual volume of not more than 50,000 barrels of malt beverages and whose products comprise three percent or less of the wholesale dealer’s total annual sales of malt beverages by volume.

  (b) The provisions of sections 702, 705, and 706 of this title shall apply to any franchise that is subject to the provisions of this subchapter. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019.)

• § 752. Definitions

  As used in this subchapter:

  (1) “Barrel” means 31 gallons of malt beverages.

  (2) “Certificate of approval holder” means a holder of a certificate of approval issued by the Board of Liquor and Lottery pursuant to section 274 of this title that produces or distributes a total annual volume of not more than 50,000 barrels of malt beverages and whose products comprise three percent or less of a wholesale dealer’s total annual sales of malt beverages by volume.

  (3) “Compensation” means the cost of a wholesale dealer’s laid-in inventory related to a franchise that has been or is about to be terminated plus five times the average annual gross profits earned by the wholesale dealer on the sale of products pursuant to the franchise during the last three calendar years or, if the franchise has not been in existence for three years, the period of time during which the franchise has been in existence. “Gross profits” shall equal the revenue earned by the wholesale dealer on the sale of products pursuant to the franchise minus the cost of those products, including shipping and taxes.

  (4) “Franchise” means a written agreement governing a relationship between a wholesale dealer and a certificate of approval holder or manufacturer that has existed for at least one year and has one or more of the following characteristics:

  (A) the wholesale dealer is granted the right to offer and sell the brands of malt beverages offered by the certificate of approval holder or manufacturer;

  (B) the wholesale dealer, as an independent business, constitutes a component of a certificate of approval holder’s or manufacturer’s distribution system;

  (C) the wholesale dealer’s business is substantially associated with the certificate of approval holder’s or manufacturer’s brand, advertising, or other commercial symbol designating the manufacturer;

  (D) the wholesale dealer’s business is substantially reliant on the certificate of approval holder or manufacturer for the continued supply of malt beverages; or

  (E) the certificate of approval holder or manufacturer has granted the wholesale dealer a license to use a trade name, trademark, service mark, or related characteristic, and there is a community of interest in the marketing of goods or services at wholesale, retail, by lease, or otherwise.

  (5) “Manufacturer” means a manufacturer licensed pursuant to section 271 of this title that produces a total annual volume of not more than 50,000 barrels of malt beverages and whose products comprise three percent or less of a wholesale dealer’s total annual sales of malt beverages by volume.

  (6) “Total annual sales” means the total volume of all malt beverages sold by a wholesale dealer in the last four completed calendar quarters. A wholesale dealer’s total annual sales of malt beverages shall include the worldwide, aggregate amount of all brands of malt beverages that were sold, directly or indirectly, during the last four completed calendar quarters by the wholesale dealer and any entity that controlled, was controlled by, or was under common control with the wholesale dealer.

  (7) “Total annual volume” means:

  (A) the amount of malt beverages manufactured worldwide during the last four completed calendar quarters, directly or indirectly, by or on behalf of:

  (i) the certificate of approval holder or manufacturer;

  (ii) any employee, director, or officer of a certificate of approval holder or manufacturer; or

  (iii) an affiliate of the certificate of approval holder or manufacturer, regardless of whether the affiliation is corporate, or is by management, direction, or control; or

  (B) the amount of malt beverages distributed worldwide during the last four completed calendar quarters directly or indirectly, by or on behalf of:

  (i) the certificate of approval holder;

  (ii) any employee, director, or officer of a certificate of approval holder; or

  (iii) an affiliate of the certificate of approval holder, regardless of whether the affiliation is corporate, or is by management, direction, or control. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019; amended 2017, No. 145 (Adj. Sess.), § 7, eff. July 1, 2022; 2019, No. 73, § 20.)

• § 753. Cancellation of franchise

  (a) The terms of a franchise between the certificate of approval holder or manufacturer and the wholesale dealer shall govern the right to cancel, terminate, refuse to continue, or to cause a wholesale dealer to relinquish a franchise.

  (b) In the absence of a provision in a written franchise agreement to the contrary, the certificate of approval holder or manufacturer may cancel, terminate, refuse to continue, or cause the wholesale dealer to relinquish the franchise for good cause as provided pursuant to section 754 of this subchapter.

  (c) In the absence of a provision in a written franchise agreement to the contrary, the certificate of approval holder or manufacturer may cancel, terminate, refuse to continue, or cause the wholesale dealer to relinquish the franchise for no cause as provided pursuant to section 755 of this subchapter. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019; amended 2017, No. 145 (Adj. Sess.), § 8, eff. July. 1, 2022.)

• § 754. Cancellation for good cause; notice; rectification

  (a)(1) Except as otherwise provided pursuant to section 753 of this subchapter and subsection (d) of this section, a certificate of approval holder or manufacturer that wishes to terminate or cancel a franchise for good cause shall provide the franchisee with at least 120 days’ written notice of the intent to terminate or cancel the franchise.

  (2) The notice shall state the causes and reasons for the intended termination or cancellation.

  (b) A franchisee shall have 120 days in which to rectify any claimed deficiency.

  (c) The Superior Court, upon petition and after providing both parties with notice and opportunity for a hearing, shall determine whether good cause exists to allow termination or cancellation of the franchise.

  (d) The notice provisions of subsection (a) of this section may be waived if the reason for termination or cancellation is insolvency, the occurrence of an assignment for the benefit of creditors, bankruptcy, or if the certificate of approval holder or manufacturer is able to prove to the court that providing the required notice would do irreparable harm to the marketing of its product. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019.)

• § 755. Cancellation for no cause; notice; compensation

  Except as otherwise provided pursuant to section 753 of this subchapter, a certificate of approval holder or manufacturer that wishes to terminate or cancel a franchise for no cause shall:

  (1) Provide the franchisee with written notice of the intent to cancel or terminate the franchise at least 30 days before the date on which the franchise shall terminate.

  (2) On or before the date the franchise shall be canceled or terminated, pay, or have paid on its behalf by a designated wholesale dealer, compensation, as defined pursuant to section 752 of this subchapter, for the franchisee’s interest in the franchise. The compensation shall be the wholesale dealer’s sole and exclusive remedy for any termination or cancellation pursuant to this section. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019.)

• § 756. Sale or transfer by wholesale dealer

  (a)(1) In the absence of a provision of the franchise to the contrary, a wholesale dealer wishing to sell or otherwise transfer its interests in a franchise shall give at least 90 days’ written notice of the proposed sale or transfer to the certificate of approval holder or manufacturer.

  (2) The notice of intended sale or transfer shall give the full name and address of the proposed transferee, along with full details outlining the qualifications of the proposed transferee that, in the opinion of the wholesale dealer, make the proposed transferee competent to operate the franchise.

  (b) If the certificate of approval holder or manufacturer opposes the proposed sale or transfer to the proposed transferee, the certificate of approval holder or manufacturer may either:

  (1) prevent the proposed sale or transfer from occurring by paying compensation for the wholesale dealer’s interest in the franchise in the same manner as if the franchise were being terminated for no cause pursuant to section 755 of this subchapter; or

  (2) not less than 60 days before the date of the proposed sale or transfer, file a petition with the Superior Court that clearly states the certificate of approval holder’s or manufacturer’s reasons for resisting the proposed sale or transfer.

  (c)(1) Upon receipt of a petition pursuant to subdivision (b)(2) of this section, the Superior Court shall hold a hearing on the proposed transfer or sale. The court shall make a full inquiry into the qualifications of the proposed transferee and shall determine whether or not the proposed transferee is in a position to continue substantially the operations of the franchise, to assume the obligations of the franchise holder, and to conduct the business in a manner that will protect the legitimate interests of the certificate of approval holder or manufacturer.

  (2) If the Superior Court finds the proposed transferee is qualified to operate the franchise, it shall approve the transfer of the franchise to the proposed transferee.

  (d) The provisions of subsections (b) and (c) of this section shall not apply to the sale or transfer of a franchise to the spouse, child, grandchild, sibling, parent, foster child, child-in-law, sibling-in-law, niece, or nephew of the owner of the wholesale dealer. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019; amended 2017, No. 145 (Adj. Sess.), § 9, eff. July 1, 2022.)

• § 757. Merger of franchisor

  In the absence of a provision of the franchise to the contrary, the merger of a certificate of approval holder or manufacturer with a third party shall not void the franchise unless good cause is shown pursuant to section 754 of this subchapter, or the franchise is terminated pursuant to section 755 of this subchapter. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019.; amended 2017, No. 145 (Adj. Sess.), § 10, eff. July 1, 2022.)

• § 758. Heirs, successors, and assigns

  In the absence of a provision of the franchise to the contrary, the provisions of this subchapter shall apply to the heirs, successors, and assigns of any party to a franchise that is subject to this subchapter. (Added 2017, No. 145 (Adj. Sess.), § 5, eff. Jan. 1, 2019; amended 2017, No. 145 (Adj. Sess.), § 11, eff. July 1, 2022.)

• § 759. Written agreement

  All franchises entered into pursuant to this subchapter shall be in writing. (Added 2017, No. 145 (Adj. Sess.), § 6, eff. July 1, 2022.)