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:

    
    

    1. a requirement that Petitioner locate its travel office only in "That portion of Pinellas County, Florida lying south of Florida State Highway 694".

    2. a requirement that Petitioner pay a quarterly advertising contribution.

    3. 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....

    
    

    1. 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.

       
       

    2. Tradenames, 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....

       
       

    3. 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.

    4. 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.

       * * *

       1. We will provide you with a policy manual, operations manual, preferred supplier manual, marketing manual, and an employee handbook which may be updated periodically.

       2. 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.

       3. 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....

       
       

    5. 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:

    1. 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

    2. 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:

    
    

    1. 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

(904) 488-9675

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.

Docket for Case No: 94-000568

Orders for Case No: 94-000568