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House Amendment 5260

Amendment Text

PAG LIN
  1  1    Amend House File 2235 as follows:
  1  2    #1.  By striking everything after the enacting
  1  3 clause and inserting the following:
  1  4    "Section 1.  Section 523H.5, subsections 3, 4, 5,
  1  5 and 7, Code Supplement 1995, are amended to read as
  1  6 follows:
  1  7    3.  A franchisor may require as a condition of a
  1  8 transfer any of the following:
  1  9    a.  That the transferee successfully complete a
  1 10 reasonable at the time of the transfer the
  1 11 franchisor's current training program required of new
  1 12 franchisees.
  1 13    b.  That a reasonable transfer fee be paid to
  1 14 reimburse the franchisor for the franchisor's
  1 15 reasonable and actual expenses directly attributable
  1 16 to the transfer.
  1 17    c.  That the franchisee pay or make provision
  1 18 reasonably provisions acceptable to the franchisor to
  1 19 pay any amount due the franchisor or the franchisor's
  1 20 affiliate.
  1 21    d.  That the financial terms of the transfer comply
  1 22 at the time of the transfer with the franchisor's
  1 23 current financial requirements for franchisees.
  1 24    4.  A If a franchisee may transfer transfers the
  1 25 franchisee's interest in the franchise, for the
  1 26 unexpired term of the franchise agreement, and a
  1 27 franchisor shall not require the franchisee or the
  1 28 transferee to enter into a new or different franchise
  1 29 agreement as a condition of the transfer.
  1 30    5.  A franchisee shall give the franchisor no less
  1 31 than sixty days' written notice of a transfer which is
  1 32 subject to the provisions of this section, and on
  1 33 request from the franchisor shall provide in writing
  1 34 the ownership interests of all persons holding or
  1 35 claiming an equitable or beneficial interest in the
  1 36 franchise subsequent to the transfer or the
  1 37 franchisee, as appropriate.  A franchisee shall not
  1 38 circumvent the intended effect of a contractual
  1 39 provision governing the transfer of the franchise or
  1 40 an interest in the franchise by means of a management
  1 41 agreement, lease, profit-sharing agreement,
  1 42 conditional assignment, or other similar device.
  1 43    7.  A transfer by a franchisee is deemed to be
  1 44 approved sixty days after the franchisee submits the
  1 45 request for consent to the transfer unless the
  1 46 franchisor withholds consent to the transfer as
  1 47 evidenced in writing, specifying the reason or reasons
  1 48 for withholding the consent, or the franchisor
  1 49 exercises a contractual right of first refusal.  The
  1 50 written notice must be delivered to the franchisee
  2  1 prior to the expiration of the sixty-day period.  Any
  2  2 such notice is privileged and is not actionable based
  2  3 upon a claim of defamation.
  2  4    Sec. 2.  Section 523H.5, subsection 12, unnumbered
  2  5 paragraph 1, Code Supplement 1995, is amended to read
  2  6 as follows:
  2  7    The following occurrences shall not be considered
  2  8 transfers requiring the consent of the franchisor
  2  9 under a franchise agreement, and shall not result in
  2 10 the imposition of any penalties or make applicable any
  2 11 right of first refusal by the franchisor, provided
  2 12 that the franchisor, except with respect to succession
  2 13 of ownership of a franchise upon the death or
  2 14 disability of a franchisee under paragraph "a", is
  2 15 given at least sixty-days advance written notice of
  2 16 any of the following occurrences:
  2 17    Sec. 3.  Section 523H.5, subsection 12, paragraphs
  2 18 a and f, Code Supplement 1995, are amended to read as
  2 19 follows:
  2 20    a.  The succession of ownership of a franchise upon
  2 21 the death or disability of a franchisee, or of an
  2 22 owner of a franchise, to the surviving spouse, heir
  2 23 child or children, or a partner active in the
  2 24 management of the franchisee franchise unless the
  2 25 successor fails to meet within one year the then
  2 26 current reasonable qualifications of the franchisor
  2 27 for franchisees and the enforcement of the reasonable
  2 28 current qualifications is not arbitrary or capricious,
  2 29 provided that the surviving spouse, child or children,
  2 30 or partner is responsible for maintaining all of the
  2 31 standards and obligations under the franchise
  2 32 agreement during the one-year period preceding
  2 33 qualification as a franchisee.
  2 34    f.  A grant or retention of a security interest in
  2 35 the assets of the franchised business or its assets,
  2 36 or an ownership interest in the franchisee
  2 37 specifically excluding all rights under the franchise
  2 38 agreement, provided the security agreement establishes
  2 39 an obligation on the part of the secured party
  2 40 enforceable by the franchisor to give the franchisor
  2 41 notice of the secured party's intent to foreclose on
  2 42 the collateral simultaneously with notice to the
  2 43 franchisee, and a reasonable opportunity to redeem the
  2 44 interests of the secured party and recover the secured
  2 45 party's interest in the franchise or assets of the
  2 46 franchised business by paying the secured obligation.
  2 47    Sec. 4.  Section 523H.5, subsection 12, paragraph
  2 48 e, Code Supplement 1995, is amended by striking the
  2 49 paragraph.
  2 50    Sec. 5.  Section 523H.5, subsection 13, Code
  3  1 Supplement 1995, is amended to read as follows:
  3  2    13.  A franchisor shall not interfere or attempt to
  3  3 interfere with any disposition of an interest in a
  3  4 franchise or franchised business as described in
  3  5 subsection 12, paragraphs "a" through "f", provided
  3  6 that the franchisor may prohibit any disposition of
  3  7 any interest, directly or indirectly, to a competitor
  3  8 of the franchisor or a competitor of any of the
  3  9 franchisor's franchisees.
  3 10    Sec. 6.  Section 523H.6, Code Supplement 1995, is
  3 11 amended to read as follows:
  3 12    523H.6  ENCROACHMENT.
  3 13    1.  If a franchisor develops, or grants to a
  3 14 franchisee the right to develop, a new outlet or
  3 15 location which sells essentially the same goods or
  3 16 services under the same trademark, service mark, trade
  3 17 name, logotype, or other commercial symbol as an
  3 18 existing franchisee and the new outlet or location is
  3 19 in unreasonable proximity to the existing franchisee's
  3 20 outlet or location and has an adverse effect on the
  3 21 gross sales of the existing franchisee's outlet or
  3 22 location, the existing adversely affected franchisee
  3 23 has a cause of action for monetary damages in an
  3 24 amount calculated pursuant to subsection 3, unless any
  3 25 of the following apply:
  3 26    a.  The franchisor has first offered the new outlet
  3 27 or location to the existing franchisee on the same
  3 28 basic terms and conditions available to the other
  3 29 potential franchisee, or, if the new outlet or
  3 30 location is to be owned by the franchisor, on the
  3 31 terms and conditions that would ordinarily be offered
  3 32 to a franchisee for a similarly situated outlet or
  3 33 location.
  3 34    b.  The adverse impact on the existing franchisee's
  3 35 annual gross sales, based on a comparison to the
  3 36 annual gross sales from the existing outlet or
  3 37 location during the twelve-month period immediately
  3 38 preceding the opening of the new outlet or location,
  3 39 is determined to have been less than five ten percent
  3 40 during the first twelve months of operation of the new
  3 41 outlet or location.
  3 42    c.  The existing franchisee, at the time the
  3 43 franchisor develops, or grants to a franchisee the
  3 44 right to develop, a new outlet or location, is not in
  3 45 compliance with the franchisor's then current
  3 46 reasonable criteria for eligibility for a new
  3 47 franchise.  A franchisee determined to be ineligible
  3 48 pursuant to this paragraph shall be afforded the
  3 49 opportunity to seek compensation pursuant to the
  3 50 formal procedure established under paragraph "d",
  4  1 subparagraph (2).  Such procedure shall be the
  4  2 franchisee's exclusive remedy.
  4  3    d.  The franchisor has established both of the
  4  4 following:
  4  5    (1)  A formal procedure for hearing and acting upon
  4  6 claims by an existing franchisee with regard to a
  4  7 decision by the franchisor to develop, or grant to a
  4  8 franchisee the right to develop, a new outlet or
  4  9 location, prior to the opening of the new outlet or
  4 10 location.
  4 11    (2)  A reasonable formal procedure for awarding
  4 12 compensation or other form of consideration to a
  4 13 franchisee to offset all or a portion of the
  4 14 franchisee's lost profits caused by the establishment
  4 15 of the new outlet or location.  The procedure shall be
  4 16 deemed reasonable if approved by a majority of the
  4 17 franchisor's franchisees in the United States, either
  4 18 individually or by a representative body.  The
  4 19 procedure shall involve, at the option of the
  4 20 franchisee, least one of the following:
  4 21    (a)  A panel with the authority to make a decision
  4 22 or award in accordance with the formal procedure,
  4 23 comprised of an equal number of members selected by
  4 24 the franchisee and the franchisor, and one additional
  4 25 member to be selected unanimously by the members
  4 26 selected by the franchisee and the franchisor.
  4 27    (b)  A neutral third-party mediator or an
  4 28 arbitrator with the authority to make a decision or
  4 29 award in accordance with the formal procedure.  The
  4 30 procedure shall be deemed reasonable if approved by a
  4 31 majority of the franchisor's franchisees in the United
  4 32 States, either individually or by an elected
  4 33 representative body.
  4 34    (c)  Arbitration of any dispute before neutral
  4 35 arbitrators with the authority to make a decision or
  4 36 award in accordance with the formal procedure and
  4 37 pursuant to the rules of the American arbitration
  4 38 association.  The award of an arbitrator pursuant to
  4 39 this subparagraph subdivision is subject to judicial
  4 40 review pursuant to chapter 679A.
  4 41    e.  The existing franchisee has been granted
  4 42 reasonable territorial rights and the new outlet or
  4 43 location does not violate those territorial rights.
  4 44    2.  A franchisor shall establish and make available
  4 45 to its franchisees a written policy setting forth its
  4 46 reasonable criteria to be used by the franchisor to
  4 47 determine whether an existing franchisee is eligible
  4 48 for a franchise for an additional outlet or location.
  4 49    3.  a.  In establishing damages under a cause of
  4 50 action brought pursuant to this section, the
  5  1 franchisee has the burden of proving the amount of
  5  2 lost profits attributable to the compensable sales.
  5  3 In any action brought under this section, the damages
  5  4 payable shall be limited to no more than three years
  5  5 of the proven lost profits.  For purposes of this
  5  6 subsection, "compensable sales" means the annual gross
  5  7 sales from the existing outlet or location during the
  5  8 twelve-month period immediately preceding the opening
  5  9 of the new outlet or location less both of the
  5 10 following:
  5 11    (1)  Five Ten percent.
  5 12    (2)  The actual gross sales from the operation of
  5 13 the existing outlet or location for the twelve-month
  5 14 period immediately following the opening of the new
  5 15 outlet or location.
  5 16    b.  Compensable sales shall exclude any amount
  5 17 attributable to factors other than the opening and
  5 18 operation of the new outlet or location.
  5 19    4.  Any cause of action brought under this section
  5 20 must be filed within eighteen months of the opening of
  5 21 the new outlet or location or within three months
  5 22 after the completion of the procedure under subsection
  5 23 1, paragraph "d", subparagraph (2), whichever is
  5 24 later.  An application to vacate the award of an
  5 25 arbitrator under subsection 1, paragraph "d",
  5 26 subparagraph (2), subparagraph subdivision (c), shall
  5 27 be filed as provided in section 679A.12.
  5 28    5.  Upon petition by the franchisor or the
  5 29 franchisee, the district court may grant a permanent
  5 30 or preliminary injunction to prevent injury or
  5 31 threatened injury for a violation of this section or
  5 32 to preserve the status quo pending the outcome of the
  5 33 formal procedure under subsection 1, paragraph "d",
  5 34 subparagraph (2).
  5 35    Sec. 7.  Section 523H.7, subsections 1 and 3, Code
  5 36 Supplement 1995, are amended to read as follows:
  5 37    1.  Except as otherwise provided by this chapter, a
  5 38 franchisor shall not terminate a franchise prior to
  5 39 the expiration of its term except for good cause.  For
  5 40 purposes of this section, "good cause" is cause based
  5 41 upon a legitimate business reason.  "Good cause"
  5 42 includes the failure of the franchisee to comply with
  5 43 any material lawful requirement of the franchise
  5 44 agreement, provided that the termination by the
  5 45 franchisor is not arbitrary or capricious when
  5 46 compared to the actions of the franchisor in other
  5 47 similar circumstances.  The burden of proof of showing
  5 48 that action of the franchisor is arbitrary or
  5 49 capricious shall rest with the franchisee.
  5 50    3.  Notwithstanding subsection 2, a franchisor may
  6  1 terminate a franchisee upon written notice and without
  6  2 an opportunity to cure if any of the following apply:
  6  3    a.  The franchisee or the business to which the
  6  4 franchise relates is declared bankrupt or judicially
  6  5 determined to be insolvent.
  6  6    b.  All or a substantial part of the assets of the
  6  7 franchise or the business to which the franchisee
  6  8 relates are assigned to or for the benefit of any
  6  9 creditor which is subject to chapter 681.  An
  6 10 assignment for the benefit of any creditor pursuant to
  6 11 this paragraph does not include the granting of a
  6 12 security interest in the normal course of business.
  6 13    c.  The franchisee voluntarily abandons the
  6 14 franchise by failing to operate the business for five
  6 15 consecutive business days during which the franchisee
  6 16 is required to operate the business under the terms of
  6 17 the franchise, or any shorter period after which it is
  6 18 not unreasonable under the facts and circumstances for
  6 19 the franchisor to conclude that the franchisee does
  6 20 not intend to continue to operate the franchise,
  6 21 unless the failure to operate is due to circumstances
  6 22 beyond the control of the franchisee.
  6 23    d.  The franchisor and franchisee agree in writing
  6 24 to terminate the franchise.
  6 25    e.  The franchisee knowingly makes any material
  6 26 misrepresentations or knowingly omits to state any
  6 27 material facts relating to the acquisition or
  6 28 ownership or operation of the franchise business.
  6 29    f.  After three material breaches of a franchise
  6 30 agreement occurring within a twelve-month period, for
  6 31 which the franchisee has been given notice and an
  6 32 opportunity to cure, the franchisor may terminate upon
  6 33 any subsequent material breach within the twelve-month
  6 34 period following the third such material breach
  6 35 without providing an opportunity to cure, provided
  6 36 that the action is not arbitrary and capricious.
  6 37    g.  The franchised business or business premises of
  6 38 the franchisee are lawfully seized, taken over, or
  6 39 foreclosed by a government authority or official.
  6 40    h.  The franchisee is convicted of a felony or any
  6 41 other criminal misconduct which materially and is
  6 42 likely to adversely affects affect the operation,
  6 43 maintenance, or goodwill of the franchise in the
  6 44 relevant market.
  6 45    i.  The franchisee operates the franchised business
  6 46 in a manner that imminently endangers the public
  6 47 health and safety.
  6 48    Sec. 8.  Section 523H.11, Code Supplement 1995, is
  6 49 amended to read as follows:
  6 50    523H.11  REPURCHASE OF ASSETS.
  7  1    A franchisor shall not prohibit a franchisee from,
  7  2 or enforce a prohibition against a franchisee,
  7  3 engaging in any lawful business at any location after
  7  4 a termination or refusal to renew by a franchisor,
  7  5 other than a termination for good cause as provided in
  7  6 section 523H.7 or refusal to renew by a franchisor for
  7  7 good cause as provided in section 523H.8, unless it is
  7  8 one which relies on a substantially similar marketing
  7  9 program as the terminated or nonrenewed franchise or
  7 10 unless the franchisor offers in writing no later than
  7 11 ten business days before expiration of the franchise
  7 12 to purchase the assets of the franchised business for
  7 13 its fair market value as a going concern.  The value
  7 14 of the assets shall not include the goodwill of the
  7 15 business attributable to the trademark licensed to the
  7 16 franchisee in the franchise agreement.  The offer may
  7 17 be conditioned upon the ascertainment of a fair market
  7 18 value by an impartial appraiser.  This section does
  7 19 not apply to assets of the franchised business which
  7 20 the franchisee did not purchase from the franchisor,
  7 21 or the agent of the franchisor.
  7 22    Sec. 9.  Section 523H.12, Code 1995, is amended by
  7 23 striking the section and inserting in lieu thereof the
  7 24 following:
  7 25    523H.12  INDEPENDENT SOURCING.
  7 26    1.  A franchisor may offer franchises as a part of
  7 27 a partially or fully developed turnkey business.
  7 28    2.  A franchisor may require that franchisees
  7 29 purchase from the franchisor, or one or more suppliers
  7 30 selected by the franchisor, either or both of the
  7 31 following:
  7 32    a.  Equipment, products, and services required to
  7 33 establish or operate the franchise and that utilize or
  7 34 embody the franchisor's trade secrets, specialized
  7 35 technology or proprietary processes or ingredients or
  7 36 for which it is not practical to issue specifications
  7 37 or standards.
  7 38    b.  Products purchased for resale by the
  7 39 franchisee, with or without modification or value
  7 40 added by the franchisee, if such products are among
  7 41 the principal products sold by the franchisee.
  7 42    3.  A franchisor shall permit its franchisees to
  7 43 obtain other equipment, products, and services
  7 44 required to establish or operate the franchise from
  7 45 sources chosen by the franchisee, provided that the
  7 46 supplier first demonstrates to the franchisor's
  7 47 reasonable satisfaction that the supplier satisfies
  7 48 all of the following:
  7 49    a.  Meets the franchisor's specifications,
  7 50 standards, and requirements regarding quality,
  8  1 variety, service, safety, and health for the
  8  2 equipment, products, and services supplied and the
  8  3 facilities used in the production and distribution of
  8  4 such equipment, products, and services.
  8  5    b.  Has the capacity to meet franchisee supply
  8  6 requirements.
  8  7    c.  Is financially sound and has a sound business
  8  8 reputation.
  8  9    d.  Will supply equipment, products, or services to
  8 10 a sufficient number of franchisees of the franchisor
  8 11 to enable the franchisor to economically monitor
  8 12 compliance by the supplier with the franchisor's
  8 13 specifications, standards, and requirements.
  8 14    e.  Will comply with the franchisor's reporting
  8 15 requirements.
  8 16    Sec. 10.  Section 523H.13, Code 1995, is amended to
  8 17 read as follows:
  8 18    523H.13  PRIVATE CIVIL ACTION.
  8 19    A person who violates a provision of this chapter
  8 20 or order issued under this chapter is liable for
  8 21 damages caused by the violation, including, but not
  8 22 limited to, costs and reasonable attorneys' and
  8 23 experts' fees, and subject to other appropriate relief
  8 24 including injunctive and other equitable relief." 
  8 25 
  8 26 
  8 27                              
  8 28 DINKLA of Guthrie
  8 29 HF 2235.315 76
  8 30 mj/cf
     

Text: H05259                            Text: H05261
Text: H05200 - H05299                   Text: H Index
Bills and Amendments: General Index     Bill History: General Index

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