Text: HF02234 Text: HF02236 Text: HF02200 - HF02299 Text: HF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Section 1. Section 523H.1, subsection 3, Code 1995, is 1 2 amended by adding the following new paragraph: 1 3 NEW PARAGRAPH. d. "Franchise" also does not include a 1 4 nonprofit organization operated on a cooperative basis by and 1 5 for independent retailers which offers goods and services 1 6 primarily to its member retailers on a wholesale basis. 1 7 Sec. 2. Section 523H.2, Code Supplement 1995, is amended 1 8 to read as follows: 1 9 523H.2 APPLICABILITY. 1 10 This chapter applies only to anew or existingfranchise 1 11 that is operatedin the state of Iowawithin this state 1 12 pursuant to a franchise agreement entered into on or after 1 13 July 1, 1996. For purposes of this chapter, the franchise is 1 14 operated in this state only if the premises from which the 1 15 franchise is operated is physically located in this state. 1 16 For purposes of this chapter, a franchise including marketing 1 17 rights in or to this state, is deemed to be operated in this 1 18 state only if the franchisee's principal business office is 1 19 physically located in this state. This chapter does not apply 1 20 to a franchise solely because an agreement relating to the 1 21 franchise provides that the agreement is subject to or 1 22 governed by the laws of this state. The provisions of this 1 23 chapter do not apply to any existing or future contracts 1 24 between Iowa franchisors and franchisees who operate 1 25 franchises located out of state. 1 26 Sec. 3. Section 523H.5, subsection 1, Code Supplement 1 27 1995, is amended by striking the subsection and inserting in 1 28 lieu thereof the following: 1 29 1. A franchisor shall not refuse to permit a transfer of a 1 30 franchise, except for good cause. For purposes of this 1 31 section, "good cause" includes, but is not limited to, the 1 32 following: 1 33 a. The failure of the proposed transferee to satisfy at 1 34 the time of transfer the current qualifications of the 1 35 franchisor for new franchisees. 2 1 b. The failure of the transferor or proposed transferee to 2 2 cure a breach of any term of the franchise agreement. 2 3 Sec. 4. Section 523H.5, subsections 2, 3, 5, 6, and 7, 2 4 Code Supplement 1995, are amended to read as follows: 2 5 2. Except as otherwise provided inthis sectionsubsection 2 6 12, a franchisor may exercise a right of first refusal 2 7 contained in a franchise agreement after receipt of a proposal 2 8 from the franchisee to transfer the franchise. 2 9 3. A franchisor may require as a condition of a transfer, 2 10 in addition to any other transfer requirements contained in 2 11 the franchise agreement, any of the following: 2 12 a. That the transferee successfully completea reasonable2 13 at the time of the transfer the franchisor's current training 2 14 program. 2 15 b. That a reasonable transfer fee be paid to reimburse the 2 16 franchisor for the franchisor's reasonableand actualexpenses 2 17directlyattributable to the transfer. 2 18 c. That the franchisee pay or makeprovision reasonably2 19 provisions acceptable to the franchisor to pay any amount due 2 20 the franchisor or the franchisor's affiliate. 2 21 d. That the financial terms of the transfer comply at the 2 22 time of the transfer with the franchisor's currentfinancial2 23 requirementsfor franchiseesregarding financial terms of a 2 24 transfer. 2 25 5. A franchisee shall give the franchisor no less than 2 26 sixty days' written notice of a transfer which is subject to 2 27 the provisions of this section, andon request from the2 28franchisorshall provide in writing the ownership interests of 2 29 all persons holding or claiming an equitable or beneficial 2 30 interest in the franchise subsequent to the transfer or the 2 31 franchisee, as appropriate. A franchisee shall not circumvent 2 32 the intended effect of a contractual provision governing the 2 33 transfer of the franchise or an interest in the franchise by 2 34 means of a management agreement, lease, profit-sharing 2 35 agreement, conditional assignment, or other similar device. 3 1 6. A franchisor shall not transfer its interest in a 3 2 franchise unless the franchisor makes reasonable provision for 3 3 the performance of the franchisor's obligations under the 3 4 franchise agreement by the transferee. For purposes of this 3 5 subsection, "reasonable provision" means that upon the 3 6 transfer, the entity assuming the franchisor's obligations 3 7 has, to the best of the franchisor's knowledge, the financial 3 8 means to perform the franchisor's obligations in the ordinary 3 9 course of business, but does not mean that the franchisor 3 10 transferring the franchise is required to guarantee 3 11 obligations of the underlying franchise agreement. 3 12 7. A transfer by a franchisee is deemed to be approved 3 13 sixty days after the franchisee submits the request for 3 14 consent to the transfer unless the franchisor withholds 3 15 consent to the transfer as evidenced in writing, specifying 3 16 the reason or reasons for withholding the consent, or the 3 17 franchisor exercises a contractual right of first refusal. 3 18 The written notice must be delivered to the franchisee prior 3 19 to the expiration of the sixty-day period. Any such notice is 3 20 privileged and is not actionable based upon a claim of 3 21 defamation. 3 22 Sec. 5. Section 523H.5, subsection 4, Code Supplement 3 23 1995, is amended by striking the subsection. 3 24 Sec. 6. Section 523H.5, subsection 12, Code Supplement 3 25 1995, is amended by striking the subsection and inserting in 3 26 lieu thereof the following: 3 27 12. a. A franchisor shall not deny the surviving spouse 3 28 or a child or children of a deceased or permanently 3 29 incapacitated franchisee the opportunity to participate in the 3 30 ownership of the franchise under a valid franchise agreement 3 31 for a period of one year after the death or permanent 3 32 incapacity of the franchisee. During that time, the surviving 3 33 spouse or the child or children of the franchisee shall either 3 34 meet all of the qualifications which the franchisee was 3 35 subject to at the time of the death or permanent incapacity of 4 1 the franchisee, or sell, transfer, or assign the franchise to 4 2 a person who meets the franchisor's current qualifications for 4 3 a new franchisee. The rights granted pursuant to this 4 4 paragraph are subject to the surviving spouse or the child or 4 5 children of the franchisee maintaining all standards and 4 6 obligations of the franchise. 4 7 b. A franchisor shall not deny the transfer of an 4 8 ownership interest in a franchise to an existing partner in 4 9 the franchise who has previously been approved as a franchisee 4 10 by the franchisor and who, since being approved as a 4 11 franchisee, has remained active in the management of the 4 12 franchise as an operating partner. 4 13 c. (1) A franchisor is prohibited from exercising a right 4 14 of first refusal with respect to a transfer of a franchise to 4 15 a surviving spouse or a child or children who is seeking to 4 16 qualify as a franchisee or who becomes qualified as a 4 17 franchisee pursuant to paragraph "a", or with respect to a 4 18 transfer of a franchise to an existing partner pursuant to 4 19 paragraph "b". 4 20 (2) This subsection does not prohibit a franchisor from 4 21 exercising the right of first refusal to purchase a franchise 4 22 pursuant to subsection 2, after receipt of a bona fide offer 4 23 to purchase the franchise by a proposed purchaser of the 4 24 franchise. 4 25 Sec. 7. Section 523H.5, subsection 13, Code Supplement 4 26 1995, is amended by striking the subsection. 4 27 Sec. 8. Section 523H.6, Code Supplement 1995, is amended 4 28 to read as follows: 4 29 523H.6 ENCROACHMENT. 4 30 1. If a franchisor develops, or grants to a franchisee the 4 31 right to develop, a new outlet or location which sells 4 32 essentially the same goods or services under the same 4 33 trademark, service mark, trade name, logotype, or other 4 34 commercial symbol as an existing franchisee and the new outlet 4 35 or location is in unreasonable proximity to the existing 5 1 franchisee's outlet or location and has an adverse effect on 5 2 the gross sales of the existing franchisee's outlet or 5 3 location, the existing adversely affected franchisee has a 5 4 cause of action for monetary damages in an amount calculated 5 5 pursuant to subsection 3, unless any of the following apply: 5 6 a. The franchisor has first offered the new outlet or 5 7 location to the existing franchisee on the same basic terms 5 8 and conditions available to the other potential franchisee, 5 9 or, if the new outlet or location is to be owned by the 5 10 franchisor, on the terms and conditions that would ordinarily 5 11 be offered to a franchisee for a similarly situated outlet or 5 12 location. 5 13 b. The adverse impact on the existing franchisee's annual 5 14 gross sales, based on a comparison to the annual gross sales 5 15 from the existing outlet or location during the twelve-month 5 16 period immediately preceding the opening of the new outlet or 5 17 location, is determined to have been less thanfiveten 5 18 percent during the first twelve months of operation of the new 5 19 outlet or location. 5 20 c. The existing franchisee, at the time the franchisor 5 21 develops, or grants to a franchisee the right to develop, a 5 22 new outlet or location, is not in compliance with the 5 23 franchisor's then current reasonable criteria for eligibility 5 24 for a new franchise. A franchisee determined to be ineligible 5 25 pursuant to this paragraph shall be afforded the opportunity 5 26 to seek compensation pursuant to the formal procedure 5 27 established under paragraph "d", subparagraph (2). Such 5 28 procedure shall be the franchisee's exclusive remedy. 5 29 d. The franchisor has established both of the following: 5 30 (1) A formal procedure for hearing and acting upon claims 5 31 by an existing franchisee with regard to a decision by the 5 32 franchisor to develop, or grant to a franchisee the right to 5 33 develop, a new outlet or location, prior to the opening of the 5 34 new outlet or location. 5 35 (2) A reasonable formal procedure for awarding 6 1 compensation or other form of consideration to a franchisee to 6 2 offset all or a portion of the franchisee's lost profits 6 3 caused by the establishment of the new outlet or location. 6 4 The procedure shall be deemed reasonable if approved by a 6 5 majority of the franchisor's franchisees in the United States, 6 6 either individually or by a representative body. The 6 7 procedure shall involve, at the option of thefranchisee6 8 franchisor, one of the following: 6 9 (a) A panel with the authority to make a decision or award 6 10 in accordance with the formal procedure, comprised of an equal 6 11 number of members selected by the franchisee and the 6 12 franchisor, and one additional member to be selected 6 13 unanimously by the members selected by the franchisee and the 6 14 franchisor. 6 15 (b) A neutral third-party mediator or an arbitrator with 6 16 the authority to make a decision or award in accordance with 6 17 the formal procedure.The procedure shall be deemed6 18reasonable if approved by a majority of the franchisor's6 19franchisees in the United States, either individually or by an6 20elected representative body.6 21 (c) Arbitration of any dispute before neutral arbitrators 6 22 with the authority to make a decision or award in accordance 6 23 with the formal procedure and pursuant to the rules of the 6 24 American arbitration association. The award of an arbitrator 6 25 pursuant to this subparagraph subdivision is subject to 6 26 judicial review pursuant to chapter 679A. 6 27 e. The existing franchisee has been granted reasonable 6 28 territorial rights and the new outlet or location does not 6 29 violate those territorial rights. 6 30 2. A franchisor shall establish and make available to its 6 31 franchisees a written policy setting forth its reasonable 6 32 criteria to be used by the franchisor to determine whether an 6 33 existing franchisee is eligible for a franchise for an 6 34 additional outlet or location. 6 35 3. a. In establishing damages under a cause of action 7 1 brought pursuant to this section, the franchisee has the 7 2 burden of proving the amount of lost profits attributable to 7 3 the compensable sales. In any action brought under this 7 4 section, the damages payable shall be limited to no more than 7 5 three years of the proven lost profits. For purposes of this 7 6 subsection, "compensable sales" means the annual gross sales 7 7 from the existing outlet or location during the twelve-month 7 8 period immediately preceding the opening of the new outlet or 7 9 location less both of the following: 7 10 (1)FiveTen percent. 7 11 (2) The actual gross sales from the operation of the 7 12 existing outlet or location for the twelve-month period 7 13 immediately following the opening of the new outlet or 7 14 location. 7 15 b. Compensable sales shall exclude any amount attributable 7 16 to factors other than the opening and operation of the new 7 17 outlet or location. 7 18 4. Any cause of action brought under this section must be 7 19 filed within eighteen months of the opening of the new outlet 7 20 or locationor within three months after the completion of the7 21procedure under subsection 1, paragraph "d", subparagraph (2),7 22whichever is later. 7 235. Upon petition by the franchisor or the franchisee, the7 24district court may grant a permanent or preliminary injunction7 25to prevent injury or threatened injury for a violation of this7 26section or to preserve the status quo pending the outcome of7 27the formal procedure under subsection 1, paragraph "d",7 28subparagraph (2).7 29 Sec. 9. Section 523H.7, Code Supplement 1995, is amended 7 30 to read as follows: 7 31 523H.7 TERMINATION. 7 32 1. Except as otherwise provided by this chapter, a 7 33 franchisor shall not terminate a franchise prior to the 7 34 expiration of its term except for good cause. For purposes of 7 35 this section, "good cause" is cause based upon a legitimate 8 1 business reason. "Good cause" includes, but is not limited 8 2 to, the failure of the franchisee to comply with any material 8 3 lawful requirement of the franchise agreement, provided that 8 4 the termination by the franchisor is not arbitrary or 8 5 capriciouswhen compared to the actions of the franchisor in8 6other similar circumstances. The burden of proof of showing 8 7 that action of the franchisor is arbitrary or capricious shall 8 8 rest with the franchisee. 8 9 2. Prior to termination of a franchise for good cause, a 8 10 franchisor shall provide a franchisee with written notice 8 11 stating the basis for the proposed termination. After service 8 12 of written notice, the franchisee shall have a reasonable 8 13 period of time to cure the default, which in no eventshall be8 14less than thirty days or more than ninety daysneed be more 8 15 than ten days for nonpayment of moneys due under the franchise 8 16 agreement, or more than thirty days for noncompliance with any 8 17 other provision of the franchise agreement.In the event of8 18nonpayment of moneys due under the franchise agreement, the8 19period to cure need not exceed thirty days.8 20 3. Notwithstanding subsection 2, a franchisor may 8 21 terminate a franchisee upon written notice and without an 8 22 opportunity to cure if any of the following apply: 8 23 a. The franchisee or the business to which the franchise 8 24 relates is declared bankrupt or judicially determined to be 8 25 insolvent. 8 26 b. All or a substantial part of the assets of the 8 27 franchise or the business to which the franchisee relates are 8 28 assigned to or for the benefit of any creditor which is 8 29 subject to chapter 681. An assignment for the benefit of any 8 30 creditor pursuant to this paragraph does not include the 8 31 granting of a security interest in the normal course of 8 32 business. 8 33 c. The franchisee voluntarily abandons the franchise by 8 34 failing to operate the business for five consecutive business 8 35 days during which the franchisee is required to operate the 9 1 business under the terms of the franchise, or any shorter 9 2 period after which it is not unreasonable under the facts and 9 3 circumstances for the franchisor to conclude that the 9 4 franchisee does not intend to continue to operate the 9 5 franchise, unless the failure to operate is due to 9 6 circumstances beyond the control of the franchisee. 9 7 d. The franchisor and franchisee agree in writing to 9 8 terminate the franchise. 9 9 e. The franchisee knowingly makes any material 9 10 misrepresentations or knowingly omits to state any material 9 11 facts relating to the acquisition or ownership or operation of 9 12 the franchise business. 9 13 f.After three material breaches of a franchise agreement9 14occurring within a twelve-month period, for which the9 15franchisee has been given notice and an opportunity to cure,9 16the franchisor may terminate upon any subsequent material9 17breach within the twelve-month period without providing an9 18opportunity to cure, provided that the action is not arbitrary9 19and capriciousThe franchisee repeatedly fails to comply with 9 20 one or more material provisions of the franchise agreement, 9 21 whether or not the franchisee complies after receiving notice 9 22 of the failure to comply, provided that the termination by the 9 23 franchisor is not arbitrary or capricious. 9 24 g. The franchised business or business premises of the 9 25 franchisee are lawfully seized, taken over, or foreclosed by a 9 26 government authority or official. 9 27 h. The franchisee is convicted of a felony or anyother9 28 criminal misconduct whichmaterially andis likely to 9 29 adverselyaffectsaffect the operation, maintenance, or 9 30 goodwill of the franchise in the relevant market. 9 31 i. The franchisee operates the franchised business in a 9 32 manner that imminently endangers the public health and safety. 9 33 Sec. 10. Section 523H.8, subsection 1, paragraph b, Code 9 34 Supplement 1995, is amended by adding the following new 9 35 subparagraph: 10 1 NEW SUBPARAGRAPH. (4) During the six-month period prior 10 2 to the expiration of the franchise agreement or any extension, 10 3 the franchisor permits the franchisee the opportunity to sell 10 4 the franchise, and all of the following apply: 10 5 (a) The purchaser meets, at the time of the sale, the 10 6 franchisor's current requirements for a franchisee. 10 7 (b) The franchisor agrees to offer the purchaser a full- 10 8 term franchise agreement, which reflects similar terms and 10 9 conditions to those offered to other franchisees at the time 10 10 of the sale. 10 11 (c) The purchaser agrees to meet the current requirements 10 12 for franchises at the time of the sale, including the 10 13 franchisor's current requirements relating to upgrading the 10 14 franchise. 10 15 Sec. 11. Section 523H.11, Code Supplement 1995, is amended 10 16 to read as follows: 10 17 523H.11 REPURCHASE OF ASSETS. 10 18 A franchisor shall not prohibit a franchisee from, or 10 19 enforce a prohibition against a franchisee, engaging in any 10 20 lawful business at any location after a termination or refusal 10 21 to renew by a franchisor, other than a termination or refusal 10 22 to renew by a franchisor in compliance with this chapter, 10 23 unless it is one which relies on a substantially similar 10 24 marketing program as the terminated or nonrenewed franchise or 10 25 unless the franchisor offers in writing no later than ten 10 26 business days before expiration of the franchise to purchase 10 27 the assets of the franchised business for its fair market 10 28 value as a going concern. The value of the assets shall not 10 29 include the goodwill of the business attributable to the 10 30 trademark licensed to the franchisee in the franchise 10 31 agreement. The offer may be conditioned upon the 10 32 ascertainment of a fair market value by an impartial 10 33 appraiser. This section does not apply to assets of the 10 34 franchised business which the franchisee did not purchase from 10 35 the franchisor, or the agent of the franchisor. 11 1 Sec. 12. Section 523H.12, Code 1995, is amended by 11 2 striking the section and inserting in lieu thereof the 11 3 following: 11 4 523H.12 INDEPENDENT SOURCING. 11 5 1. A franchisor may offer franchises as a part of a 11 6 partially or fully developed turnkey business. 11 7 2. A franchisor may require that franchisees purchase from 11 8 the franchisor, or one or more suppliers selected by the 11 9 franchisor, either or both of the following: 11 10 a. Equipment, products, and services required to establish 11 11 or operate the franchise and that utilize or embody the 11 12 franchisor's trade secrets, specialized technology or 11 13 proprietary processes or ingredients or for which it is not 11 14 practical to issue specifications or standards. 11 15 b. Products purchased for resale by the franchisee, with 11 16 or without modification or value added by the franchisee, if 11 17 such products are among the principal products sold by the 11 18 franchisee and the sale of such products by the franchisor or 11 19 its affiliate to the franchisee is a major source of revenue 11 20 to the franchisor or its affiliate. 11 21 3. A franchisor shall permit its franchisees to obtain 11 22 other equipment, products, and services required to establish 11 23 or operate the franchise from sources chosen by the 11 24 franchisee, provided that the supplier first demonstrates to 11 25 the franchisor's reasonable satisfaction that the supplier 11 26 satisfies all of the following: 11 27 a. Meets the franchisor's specifications, standards, and 11 28 requirements regarding quality, variety, service, safety, and 11 29 health for the equipment, products, and services supplied and 11 30 the facilities used in the production and distribution of such 11 31 equipment, products, and services. 11 32 b. Has the capacity to meet franchisee supply 11 33 requirements. 11 34 c. Is financially sound and has a sound business 11 35 reputation. 12 1 d. Will supply equipment, products, or services to a 12 2 sufficient number of franchisees of the franchisor to enable 12 3 the franchisor to economically monitor compliance by the 12 4 supplier with the franchisor's specifications, standards, and 12 5 requirements. 12 6 e. Will comply with the franchisor's reporting 12 7 requirements. 12 8 Sec. 13. Section 523H.13, Code 1995, is amended to read as 12 9 follows: 12 10 523H.13 PRIVATE CIVIL ACTION. 12 11 A person who violates a provision of this chapter or order 12 12 issued under this chapter is liable for damages caused by the 12 13 violation, including, but not limited to, costs and reasonable12 14attorneys' and experts' fees,and subject to other appropriate 12 15 relief including injunctive and other equitable relief. 12 16 EXPLANATION 12 17 This bill amends provisions of chapter 523H relating to 12 18 franchise agreements. 12 19 The definition of "franchise" in section 523H.1 is amended 12 20 to exclude a nonprofit organization operated on a cooperative 12 21 basis by and for independent retailers which offers goods and 12 22 services primarily to its member retailers on a wholesale 12 23 basis. 12 24 Section 523H.2 is amended to provide that the chapter 12 25 applies only to franchises operated in Iowa pursuant to an 12 26 agreement entered into on or after July 1, 1996. 12 27 Section 523H.5, which pertains to the transfer of a 12 28 franchise, is amended to provide that the franchisor may 12 29 require that requirements contained in a franchise agreement 12 30 be met prior to permitting the transfer, in addition to other 12 31 requirements identified in section 523H.5. The bill provides 12 32 that the transferee may be required to successfully complete 12 33 the franchisor's current training program rather than a 12 34 reasonable training program, pay the franchisor's reasonable 12 35 expenses attributable to the transfer rather than the 13 1 reasonable and actual expenses directly attributable to the 13 2 transfer, and comply with the franchisor's current 13 3 requirements regarding financial terms of the transfer rather 13 4 than the current financial requirements for franchisees. The 13 5 section requires that the franchisee provide a list of 13 6 ownership interests subsequent to the transfer. Currently, 13 7 the franchisor must request the list before the franchisee is 13 8 required to provide it to the franchisor. The section 13 9 provides that the franchisor may exercise a contractual right 13 10 of first refusal to prevent the automatic approval of a 13 11 transfer within the 60-day period after the franchisee submits 13 12 the request for consent to the transfer. 13 13 The right of a franchisee, under section 523H.5, subsection 13 14 4, to transfer the franchisee's interest in the franchise for 13 15 the unexpired term of the agreement, and not be subject to a 13 16 requirement that the transfer be conditioned upon the 13 17 franchisee or transferee entering into a new or different 13 18 franchise agreement, is repealed. 13 19 The bill also strikes a portion of 523H.5 which identifies 13 20 certain occurrences which are not to be considered transfers 13 21 requiring the consent of the franchisor, and inserts language 13 22 which provides that the franchisor is not to deny the 13 23 surviving spouse or heirs of a deceased or permanently 13 24 incapacitated franchisee the opportunity to participate in the 13 25 ownership of a franchise for one year after the death or 13 26 permanent incapacity of the franchisee, or deny the transfer 13 27 to an existing partner in the franchise previously approved as 13 28 a franchisee and who has remained active in the management of 13 29 the franchise. Section 523H.5 is also amended to prohibit a 13 30 franchisor from exercising a right of first refusal with 13 31 respect to a transfer of a franchise to a surviving spouse or 13 32 child who is seeking to qualify as a franchisee or who becomes 13 33 qualified as a franchisee, or with respect to a transfer to an 13 34 existing partner, but does not prohibit a franchisor from 13 35 exercising such right after receipt of a bona fide offer to 14 1 purchase the franchise by a proposed purchaser in those 14 2 circumstances. 14 3 Section 523H.6, relating to encroachment, is amended by 14 4 adding that, in addition to existing criteria for determining 14 5 whether a new outlet or location is encroaching on an existing 14 6 franchisee, the new outlet or location must be located in 14 7 unreasonable proximity to the existing franchisee's outlet or 14 8 location. The section is amended to increase the amount by 14 9 which the new outlet or location must impact the existing 14 10 franchisee's gross sales, before a compensable claim arises, 14 11 from 5 percent to 10 percent of gross sales. The procedure 14 12 for hearing and acting upon a claim is amended to specifically 14 13 provide that the panel comprised of members selected by the 14 14 franchisee and franchisor, and the neutral arbitrators who may 14 15 also be used to hear a claim, have the authority to make a 14 16 decision or award in accordance with the formal procedure for 14 17 hearing such claims. The section is amended to provide that 14 18 the choice of whether the panel, neutral third-party mediator, 14 19 or arbitration is to be used for awarding compensation is to 14 20 be made by the franchisor, rather than the franchisee, as 14 21 currently provided. The section is amended to provide that a 14 22 franchisee does not have a cause of action for monetary 14 23 damages if the franchisee has been granted reasonable 14 24 territorial rights which are not violated by the new outlet or 14 25 location. The section is amended to provide that a cause of 14 26 action under this section must be filed within 18 months of 14 27 the opening of the new outlet or location. Currently, a cause 14 28 of action may be filed within 18 months of the opening of the 14 29 new outlet or location, or within three months after the 14 30 completion of the formal procedure for awarding compensation 14 31 to a franchisee, whichever is later. The section is also 14 32 amended by striking the language permitting the franchisor or 14 33 franchisee to seek a permanent or preliminary injunction as a 14 34 result of a violation of the section or to preserve the status 14 35 quo pending the outcome of the formal procedure. 15 1 Section 523H.7 is amended by striking language that 15 2 requires a comparison of the franchisor's actions in 15 3 terminating a franchisee with the franchisor's actions in 15 4 other similar circumstances when determining if such actions 15 5 are arbitrary or capricious. The section is amended to 15 6 provide that a reasonable period of time to cure a default 15 7 need be no more than 10 days for nonpayment of moneys due 15 8 under the agreement or more than 30 days for noncompliance 15 9 with any other provision of the agreement. Currently the 15 10 period of time to cure a default is no more than 30 days for 15 11 nonpayment of moneys due under the agreement, and no less than 15 12 30 days or more than 90 days for any other default. The 15 13 section is also amended by striking language permitting 15 14 termination of the franchise by the franchisor in the event of 15 15 a fourth material breach after three material breaches of an 15 16 agreement within a 12-month period where the franchisee has 15 17 been given an opportunity to cure the initial three breaches, 15 18 and replacing that language with a provision permitting 15 19 termination if the franchisee repeatedly fails to comply with 15 20 one or more material provisions of the franchise agreement, 15 21 whether or not the franchisee cures the breach after notice. 15 22 Section 523H.8, relating to nonrenewal of a franchise, is 15 23 amended by adding an additional circumstance under which a 15 24 franchisor may refuse to renew a franchise if proper notice of 15 25 the nonrenewal is given. Currently, a franchisor cannot 15 26 refuse to renew unless notice of an intent not to renew must 15 27 be given to the franchisee at least six months prior to the 15 28 expiration date or any extension of the franchise agreement, 15 29 and at least one additional circumstance identified in this 15 30 section also exists. The additional circumstance provided by 15 31 the bill provides that the franchisor permits the franchisee 15 32 the opportunity to sell the franchise during the period prior 15 33 to expiration, and that the purchaser meets the franchisor's 15 34 current requirements for franchisees, the franchisor agrees to 15 35 offer a full-term franchise agreement, and the purchaser 16 1 agrees to meet the current requirements for franchisees. 16 2 Section 523H.11, relating to repurchase of assets, is 16 3 amended to provide that a franchisor may prohibit a franchisee 16 4 from engaging in a lawful business at any location upon 16 5 termination or nonrenewal of the franchise in compliance with 16 6 this chapter. 16 7 Section 523H.12, relating to independent sourcing, is 16 8 stricken and rewritten to provide that a franchisor may offer 16 9 a franchise as part of a turnkey business. The section 16 10 provides that the franchisor may require that franchisees 16 11 purchase equipment, products, and services utilizing the 16 12 franchisor's trade secrets, specialized technology or 16 13 proprietary processes or ingredients, and principal products 16 14 sold by the franchisee which are a major source of revenue to 16 15 the franchisor, from the franchisor or its affiliate. A 16 16 franchisor is to permit a franchisee to obtain other 16 17 equipment, products, and services from other suppliers who 16 18 meet certain requirements identified in the section. 16 19 Section 523H.13, regarding private civil actions, is 16 20 amended to strike language providing for the recovery of costs 16 21 and reasonable attorneys' and experts' fees from a party 16 22 liable for damages as the result of a violation of this 16 23 chapter. 16 24 LSB 3985HV 76 16 25 mj/cf/24.1
Text: HF02234 Text: HF02236 Text: HF02200 - HF02299 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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