94-000568 Travel Seasons, Inc., D/B/A All Seasons Travel Professionals International vs. Department Of Transportation Status: Closed Recommended Order on Monday, January 9, 1995.

Summary: Sufficient evidence to show that Petitioner came within definintion of Disadvantaged Business Enterprise defined by Rule 14-78.008(3), Florida Administrative Code.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TRAVEL SEASONS, INC., d/b/a )

ALL SEASONS TRAVEL PROFESSIONALS )

)

Petitioner, )

)

vs. ) CASE NO. 94-O568

)

DEPARTMENT OF TRANSPORTATION )

)

Respondent. )

______________________________________)

RECOMMENDED ORDER

Upon due notice, William R. Cave, Hearing Officer, Division of

Administrative Hearings, held a formal hearing in this matter on April 28, 1994,

in St. Petersburg, Florida.

APPEARANCES

For Petitioner: Oscar Blasingame, Esquire

Blasingame, Forizs & Smiljanich, P. A.

Post Office Box 1259

St. Petersburg, Florida 33731

For Respondent: Dorothy S. Johnson, Esquire

Mary J. Dorman, Esquire

Department of Transportation

605 Suwannee Street, Mail Station 58

Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUE

Is Petitioner Travel Seasons, Inc. d/b/a All Seasons Travel Professionals

an independent business entity and, if so, does Jeanne Santo, the qualifying

owner, exercise day-to-day control of Petitioner as provided in Rule 14-78,

Florida Administrative Code?

PRELIMINARY STATEMENT

Petitioner, by Schedule "A" application dated July 27, 1993, applied to the

Respondent Department of Transportation (Department) for certification as a

Disadvantaged Business Enterprise (DBE). On December 9, 1993, the Department

informed Petitioner in writing that it intended to deny Petitioner's application

for DBE certification. On December 15, 1993, Petitioner requested a hearing

pursuant to Section 120.57(1), Florida Statutes. By letter dated February 1,

1994, the Department referred the matter to the Division of Administrative

Hearings for the assignment of a Hearing Officer and conduct of a hearing. A

formal hearing was scheduled for April 28, 1994.

At the hearing Petitioner presented the testimony of Jeanne Santo and John

Boyce. Petitioner's exhibits 1 through 4 were received as evidence. The

Department presented the testimony of Russell Waldon. Department's exhibit 1 was

received as evidence. Public Law 100-17, Section 106(c), 49 CFR Part 23,

Subpart D, Chapter 339, Florida Statutes, and Chapter 14-78, Florida

Administrative Code, were officially recognized.

A transcript of the proceeding was filed with the Division of

Administrative Hearings on May 18, 1994. An Order Granting Second Extension Of

Time For Submission Of Proposed Recommended Order was entered on June 13, 1994,

with the understanding that any time constraint for entry of a Recommended Order

under Rule 28-5.402, Florida Administrative Code, was waived in accordance with

Rule 60Q-2.031(2), Florida Administrative Code. The parties timely filed their

Proposed Recommended Orders under the extended time frame. A ruling on each

proposed finding of fact submitted by the parties has been made as reflected in

an Appendix to the Recommended Order.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the

hearing, the following relevant findings of fact are made:

Stipulated Facts:

1. Petitioner submitted its application for DBE certification on or about

July 27, 1993.

2. Petitioner and Travel Professionals International Licensing Co., d/b/a

Travel Professionals, Inc. (TPI) entered into a franchise agreement on September

28, 1993.

3. Department conducted an on-site review of Petitioner's business on

November 4, 1993.

4. Department notified Petitioner of its intent to deny its application

for DBE certification by certified mail on December 9, 1993.

5. Petitioner requested a hearing pursuant to Section 120.57(1), Florida

Statutes, on December 15, 1993.

6. One hundred per cent of Petitioner's stock is owned by Jeanne Santo, a

"socially and economically disadvantaged individual" as defined in Rule 14-

78.002(1), Florida Administrative Code, and therefore, Petitioner is in

compliance with 14-78.005(7)(b), Florida Administrative Code.

7. All securities which constitute ownership by Jeanne Santo are held

directly by Jeanne Santo, and therefore Petitioner is in compliance with Rule

14-78.005(7)(d), Florida Administrative Code.

8. The contributions of capital or expertise invested by Jeanne Santo are

real and substantial, and therefore Petitioner is in compliance with Rule 14-

78.005(7)(f), Florida Administrative Code.

9. The provisions of Rule 14-78.005(g) and (h), Florida Administrative

Code, do not apply to Petitioner.

10. The franchise agreement (Agreement) between Petitioner and TPI

contains the following terms and conditions which are not in the agreements

between Petitioner and Airlines Reporting Corporation (ARC); Petitioner and

International Airlines Travel Agent Network (IATAN); and Petitioner and Systems

One:

(a) a requirement that Petitioner locate its

travel office only in "That portion of Pinellas

County, Florida lying south of Florida State

Highway 694".

(b) a requirement that Petitioner pay a quarterly

advertising contribution.

(c) a requirement that Petitioner attend mandatory

managers' meetings.

11. ARC is customary in the travel agency industry.

12. IATAN is customary in the travel agency industry.

13. A leasing agreement for an automated reservation and ticketing system

is customary in the travel industry.

14. The Agreement requires that Petitioner be an ARC agent.

Facts Not Stipulated

15. The Fral Highway Administration (FHWA) is the federal agency that

inisters the DBE program on the national level.

16. The Department is the agency charged with the responsibility of

administering the DBE program for the State of Florida.

17. In making its determination of an applicant's eligibility for DBE, the

Department considers: (a) Surface Transportation Uniform Relocation Assistance

Act of 1987 (Public Law 100-17); (b) 49 CFR Part 23; (c) Chapter 339, Florida

Statutes, (d) Chapter 14-78, Florida Administrative Code, (e) United States

Department of Transportation (USDOT) administrative decisions; and (f)

guidelines and training material from the FHWA or USDOT.

18. The USDOT through FHWA provided the Department with a copy of DBE

Program Administration Manual (Publication No. FHWA-HI-90-047, April, 1990)

which the Department uses as a guideline for USDOT's and FWWA's interpretation

of the DBE program.

19. Below are portions of the Agreement which are pertinent to this

preceeding:

1. Purposes of this Agreement: We have developed the Travel

Professionals International System (hereinafter called "the TPI System) for the

operation of retail travel agencies, and we have developed policies, procedures

and techniques that are designed to enable such agencies to compete more

effectively in the travel market... You have requested our assistance, the use

of the TPI Systems, and a franchise from us to operate a retail travel agency

using the TPI System....

2. Franchise: We hereby grant to you and you hereby accept from us a

franchise to operate a retail travel agency utilizing the TPI System, only at

the following location(s):

That portion of Pinellas County, Florida lying

south of Florida State Highway 694.

We will not establish another franchisee or agency owned by us within

the territory described above, or establish other franchises or company owned

outlets providing similar products and services under a different trade name or

trademark or modify your territory without your written permission, so long as

you are not in default under the terms of this Agreement....

You may move the office of the travel agency to a new location in the

same general vicinity with our prior written approval, which approval will not

be unreasonably withheld. You may not operate any additional office or location

without our prior written consent, which consent will be given upon inspection

and approval of such new premises....

8. Advertising Contributions: In addition to the service fees set

forth above, you will be required to pay an "advertising contribution" in the

amount of ONE HUNDRED FIFTY ($150.00) DOLLARS per quarter. We may adjust the

advertising contribution annually on October 1, provided that any increase in

the advertising contribution will be made only with the affirmative vote of at

least fifty percent (50 percent) of the franchisees...The advertising

contributions of all franchisees shall be placed in an advertising fund to be

managed by us, and shall be used exclusively for advertising.

adenames, Service Marks, Logos, Trade Secrets, and other

Proprietary Matters:

d. As you know, you will be given certain information about the

Travel Professionals International System, our products and methods of doing

business, as well as preferred supplier agreements, training and educational

programs, computer operation and computer system arrangements, correspondence,

memoranda, operating, sales and marketing manuals, and other confidential

information. You recognize and acknowledge that this information is a valuable,

special and unique asset belonging to us and constitutes our trade secrets which

you agree to keep secret and not to disclose, during the operation of this

Agreement, or after its termination or expiration, to any person or entity for

any reason or purpose whatsoever....

10. Relationship of Parties: During the term of this Agreement, and

any renewal term, you will be an independent contractor, and you will have no

authority, expressed or implied, to bind us or to act as our agent, legal

representative, or joint venturer. At our option, you will be required to

describe yourself on all business forms, invoices, orders, stationery, and the

like, as an independent licensee of Travel Professionals International, and to

submit all such items to us for our written approval...The operation of your

business shall be determined by your own judgment and discretion, subject only

to the provisions of this Agreement and our policies and procedures, as they may

be adopted or revised from time to time. We will not regulate the hiring or

firing of your employees, the parties from whom you may accept business, the

working conditions of your employees, or the terms of your contracts with your

customers, except as may be necessary to protect the Travel Professionals

International System.

11. Service To Be Provided By Us: We will provide the following

services to you pursuant to this Agreement:

(b) We will prescribe certain standards of

operation designed to enhance your profitability,

which we shall expect you to follow.

* * *

(e) We may make recommendations to you regarding

accounting and recordkeeping systems.

* * *

(h) We will provide you with a policy manual,

operations manual, preferred supplier manual,

marketing manual, and an employee handbook which may

be updated periodically.

(i) We will provide you with marketing, sales

and promotional aids to include currently

available professionally produced television spots,

a series of high quality radio jingles, and from

time to time, printed and other promotional material

for use in your local area.

(j) We will operate an ongoing training program

for you and your personnel. This program will

include seminars, conferences, familiarization

trips, and printed materials, such as bulletins

and manuals, relating to marketing, management, and

accounting procedures, and the like, and developments

with the travel industry...

* * *

(l) We will provide, at no charge, up to five (5)

person days of management expertise and sales effort

effective on the first date of contract signing....

12. Your Obligation: During the term of this Agreement, and any

renewal term, you will obligated to pay promptly to us any fees that are due

hereunder, to maintain and keep such records and reports as we may prescribe,

and to provide us with copies of such records and reports. You will be required

to allow us to make inspection of your business and premises at any reasonable

time, and to allow us to examine your books, tax returns and records during

normal working hours. We reserve the right to establish a uniform accounting

system to keep your books and records in conformity with such system...Your

business shall be conducted in conformity with the provisions of this Agreement,

with such policies and procedures as we may publish from time to time, and all

state, federal and local laws and regulations....

You will be required to cause your chief operating officer or manager

to attend our next available training program and to cause each of the franchise

employees and principals (as shown on Schedule A attached hereto) to attend the

required training courses set forth in our published policies and procedures.

At present, mandatory training programs we provide include "New Owners

Orientation", "New Manager Orientation", and the periodic "Managers Meetings".

Although we are not obligated to do so, we offer, and plan to offer in the

future, periodic (at least three times per year), Managers Meetings. Attendance

at Managers Meetings, when offered, is mandatory. In the event you fail to send

a representative to any Managers Meetings, then you shall pay to us the

registration fee for that meeting, notwithstanding your lack of attendance at

such meeting.

20. Although paragraph 8 does require Petitioner to pay a fixed sum to TPI

for advertising, it does not restrict the qualifying owner's exercise of control

over the day-to-day decisions concerning advertising. In fact, TPI, under

paragraph 11(i) of the Agreement, agrees to furnish certain materials to assist

Petitioner in advertising on the local level.

21. It is clear throughout the Agreement that the operation of the

business is to be determined by the qualifying owner's own judgment and

discretion subject to the provisions of the Agreement and TPI's policies and

procedures which may be adopted or revised from time to time. Paragraph 4 ,

Terms of the Franchise, provides for the termination of the Agreement prior to

its expiration date. It is clear from the qualifying owner's testimony

("Because nobody tells me what to do."), that she would terminate the Agreement

rather than to allow TPI to exercise the day-to-day control of the business.

There is no question that the qualifying owner has the authority to take such

action under Paragraph 4 of the Agreement, if in no other manner, than by

defaulting under Paragraph 4(4). This gives the qualifying owner the final

authority as to who exercises the day-to-day control of the business.

22. It is clear from the testimony of TPI's Vice-President of Franchise

Sales and Development that TPI does not consider those provisions of the

Agreement that appear to place restrictions on the qualifying owner's discretion

as to the day- to-day control of the business as being mandatory,

notwithstanding the language of the provisions to the contrary. Likewise, it is

clear that TPI will not involve itself in the hiring, supervision or firing of

employees because of the liability it would place upon TPI, notwithstanding any

provision in the Agreement.

23. The parties to the Agreement are experienced business people, who have

expertise in the travel agency industry and franchising.

24. The parties to the Agreement have clear and mutual understandings and

interpretation of the meanings of the terms of the Agreement . Their

understandings and interpretations are that the Agreement does not restrict the

qualifying owner's exercise of the day-to-day control of the business. The

parties' interpretation of the Agreement is a possible and permissible

interpretation.

25. TPI has some 60 franchisees within 22 states, with 17 franchisees in

the State of Florida. There are several other franchisors that franchise travel

agencies throughout the United States, including the State of Florida.

26. The purpose of franchise agreements in the travel business in general,

and this Agreement in particular, is to enable the small, independent travel

agency to compete more effectively in the travel market. The growing trend in

the travel agency industry is to belong to a franchise. The Agreement is a

typical franchise agreement and customary in the travel industry.

CONCLUSIONS OF LAW

27. The Division of Administrative Hearings has jurisdiction over the

parties to, and the subject matter of, this proceeding pursuant to Section

120.57(1), Florida Statutes.

28. The burden of proof is on the party asserting the affirmative of an

issue before an administrative tribunal. Florida Department of Transportation

v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 2d DCA 1981). To meet this burden

the Petitioner must establish facts upon which its allegations are based by a

preponderance of the evidence. The Petitioner has met its burden in this

regard.

29. It has been stipulated that the Petitioner meets all the criteria for

certification as a DBE with the exception of the Petitioner being an independent

business entity and the failure of the qualifying owner to exercise the day-to-

day control of the business.

30. Rule 14-78.002(3), Florida Administrative Code, defines "Disadvantaged

Business Enterprise" as follows:

(3) "Disadvantaged Business Enterprise" or

"DBE" means a small business concern:

(a) Which is at least 51 percent owned by

one or more socially and economically disadvan-

taged individuals, or, in the case of a publicly

owned business, at least 51 percent of the stock

of which is owned by one or more socially and

economically disadvantaged individuals; and

(b) Whose management and daily business operations

are controlled by one or more of the socially and

economically disadvantaged individuals who own it.

31. The Department agrees that Petitioner meets the first of the two

criteria. However, the Department contends that Petitioner does not meet the

criteria set out in Rule 14-78.002(3)(b), Florida Administrative Code.

Furthermore, the Department cites the DBE Program Administration Manual at page

93 under Other Certification Issues-Franchises, as authority for denying

certification as a DBE on the basis that "[f]ranchises are ineligible because

the franchiser/franchisee arrangement, by its nature, gives the franchiser some

degree of control over the management, daily business operations, and business

development of the franchise." This position is clearly contrary to the case

law in Florida concerning conclusive presumptions unless the Petitioner is

allowed to present evidence to rebut the presumption. B.R. and W.C. v.

Department of Health and Rehabilitative Services, 558 So.2d 1027 (Fla. 2 DCA

1989), citing Straughn v. K & K Land Management, Inc., 326 So.2d 421 (Fla.

1976).

32. Pertinent to this issue, Rule 14-78.005(7)(c) and (e), Florida

Administrative Code, provides in pertinent part:

(c) To be certified under this rule chapter,

a DBE shall be an independent business entity.

In assessing business independence, the Depar-

tment shall consider all relevant factors,

including the date the firm was established,

the adequacy of its resources, and the degree

to which financial relationship, equipment

leasing, and other business relationships with

non-DBE firms which vary from industry practice.

1. The ownership and control exercised by

socially and economically disadvantaged individuals

shall be real, substantial, and continuing, and

shall go beyond mere pro forma ownership of the

firm, as reflected in its ownership documents.

* * *

(e) To be certified under this rule chapter,

the DBE shall be one in which the socially and

economically disadvantaged owner shall also possess

the power to direct or cause the direction of

management, policies, and operations of the firm

and to make day-to-day as well as major business

decisions concerning the firm's management, policy,

and operation.

1. The discretion of the socially and economically

disadvantaged owners shall not be subject to any

formal or informal restrictions (including, but

not limited to, bylaw provisions, partnership

agreements, trust agreements or charter requirements

for cumulative voting rights or otherwise) which

would vary managerial discretion customary in the

industry.

* * *

4. The minority owners shall control the hiring,

firing and supervision of all employees, and the

setting of employment policies, wages, benefits

and other employment conditions....

* * *

6. The minority owner shall control the purchase

of goods, equipment, business inventory and services

needed in the day-to-day operation of the business....

33. It is clear from a review of all the provisions of the Agreement, and

the testimony of Ms. Santo and Mr. Boyce , that the Agreement does not

restrict the Petitioner's independence as a business entity or limit the

qualifying owner's discretion to exercise the day-to-day control of the

business. Therefore, Petitioner meets all the necessary criteria of Section

339.0805, Florida Statutes, and Chapter 14-78, Florida Administrative Code, to

be certified as a Disabled Business Enterprise.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

recommended that the Department enter a Final Order granting Petitioner's

application for certification as a Disabled Business Enterprise.

RECOMMENDED this day 9th of January, 1995, at Tallahassee, Florida.

___________________________________

WILLIAM R. CAVE

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of January, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-0568

The following constitutes my specific rulings, pursuant to Section

120.59(2), Florida Statutes, on all of the proposed findings of fact submitted

by the parties in this case.

Petitioner's Proposed Findings of Fact.

1. Petitioner has listed the stipulated facts separately as paragraphs 1

through 14. These stipulated facts have been adopted in Findings of Fact 1

through 14, respectively.

2. Proposed findings of fact 1, 2, 3 and 4-5 adopted in substance as

modified in Findings of Fact 23, 24, 26 and 21, consecutively.

3. Proposed findings of fact 6 through 9 are neither material nor relevant

to this proceeding.

4. Proposed finding of fact 10 is adopted in substance as modified in

Findings of Fact 20 through 22.

Department's Proposed Findings of Fact.

1. The Department has listed the stipulated facts separately as paragraphs

1 through 14. These stipulated facts have been adopted in Findings of Fact 1

through 14, respectively.

2. Proposed findings of fact 1 and 2 are adopted in substance as modified

in Finding of Fact 19.

3. Proposed finding of fact 3 is adopted in substance as modified in

Findings of Fact 20 through 22.

4. Proposed findings of fact 4, 5 and 6 are adopted in substance as

modified in Findings of Fact 15, 16 and 17, respectively.

5. Proposed finding of 7 is rejected as being neither material nor

relevant to this proceeding.

6. Proposed findings of fact 8 and 9 are adopted in substance as modified

in Findings of Fact 18.

7. Proposed findings of fact 10, 11 and 12 are considered conclusions of

law or legal argument and for that reason are rejected as Findings of Fact.

8. Proposed findings of fact 13 and 14 are rejected as not being supported

by the record.

COPIES FURNISHED:

Oscar Blasingame, Esquire

Blasingame, Forisz, Smiljanich, P.A.

Post Office Box 1259

St. Petersburg, Florida 33731

Dorothy S,. Johnson, Esquire

Mary J. Dorman, Esquire

Department of Transportation

605 Suwannee Street, MS-58

Tallahassee Florida 32399-0458

Ben G. Watts, Secretary

ATTN: Eleanor F. Hunter

Department of Transportation

605 Suwannee Street, MS-58

Tallahassee, Florida 32399-0458

Thornton J. Williams

General Counsel

Department of Transportation

562 Haydon Burns Building

605 Suwannee Street

Tallahassee, Florida 32399-0450

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should consult with the agency that will issue the

final order in this case concerning their rules on the deadline for filing

exceptions to this Recommended Order. Any exceptions to this Recommended Order

should be filed with the agency that will issue the final order in this case.