Text: H01192 Text: H01194 Text: H01100 - H01199 Text: H Index Bills and Amendments: General Index Bill History: General Index
PAG LIN 1 1 Amend House File 334 as follows: 1 2 #1. By striking page 1, line 1, through page 3, 1 3 line 14 and inserting the following: 1 4 "Section 1. NEW SECTION. 523J.1 SHORT TITLE. 1 5 This chapter may be cited as the "Iowa Franchise 1 6 Law". 1 7 Sec. 2. NEW SECTION. 523J.2 DEFINITIONS. 1 8 As used in this chapter, unless the context 1 9 otherwise requires: 1 10 1. "Community of interest" means a continuing 1 11 financial interest between the franchisor and 1 12 franchisee in either the operation of a franchised 1 13 business or the marketing of goods or services related 1 14 to a franchised business. 1 15 2. "Franchisee" means a person who is granted a 1 16 franchise for a business located in this state. 1 17 3. "Franchise" means a contract or agreement, 1 18 either expressed or implied, whether oral or written, 1 19 between two or more persons, by which a person is 1 20 granted the right to sell or distribute goods or 1 21 services, or use a trade name, trademark, service 1 22 mark, logotype, advertising, or other commercial 1 23 symbol, in which there is a community of interest in 1 24 the business of offering, selling, or distributing 1 25 goods or services at wholesale, retail, by lease, 1 26 agreement, or otherwise. 1 27 4. "Good cause" means either of the following: 1 28 a. The failure by a franchisee to comply 1 29 substantially with essential and reasonable 1 30 requirements imposed upon the franchisee by the 1 31 franchisor, or sought to be imposed by the franchisor, 1 32 which requirements are not discriminatory as compared 1 33 with requirements imposed on other similarly situated 1 34 franchisees either by their terms or in the manner of 1 35 their enforcement. 1 36 b. Bad faith by the franchisee in carrying out the 1 37 terms of the franchise. 1 38 5. "Franchisor" means a person who grants a 1 39 franchise. 1 40 6. "Person" means person as defined in section 1 41 4.1. 1 42 Sec. 3. NEW SECTION. 523J.3 PURPOSE – RULES OF 1 43 CONSTRUCTION – VARIATION BY CONTRACT. 1 44 1. This chapter shall be liberally construed and 1 45 applied to promote its underlying remedial purposes 1 46 and policies. 1 47 2. The underlying purposes and policies of this 1 48 chapter are as follows: 1 49 a. To promote the compelling interest of the 1 50 public in fair business relations between franchisees 2 1 and franchisors, and in the continuation of franchises 2 2 on a fair basis. 2 3 b. To protect franchisees against unfair treatment 2 4 by franchisors, who inherently have superior economic 2 5 power and superior bargaining power in the negotiation 2 6 of franchises. 2 7 c. To provide franchisees with rights and remedies 2 8 in addition to those existing by contract or common 2 9 law. 2 10 d. To govern all franchise agreements, including 2 11 any renewals of or amendments to such agreements, to 2 12 the full extent consistent with the constitutions of 2 13 this state and the United States. 2 14 3. This application of this chapter shall not be 2 15 varied by contract or agreement. Any contract or 2 16 agreement purporting to do so is void and 2 17 unenforceable to that extent only. 2 18 Sec. 4. NEW SECTION. 523J.4 CANCELLATION AND 2 19 ALTERATION OF A FRANCHISE. 2 20 A franchisor, directly or through any officer, 2 21 agent, or employee, shall not terminate, cancel, fail 2 22 to renew, or substantially change the competitive 2 23 circumstances of a franchise without good cause. The 2 24 burden of proving good cause is on the franchisor. 2 25 Sec. 5. NEW SECTION. 523J.5 NOTICE OF 2 26 TERMINATION OR CHANGE IN FRANCHISE. 2 27 Except as otherwise provided in this section, a 2 28 franchisor shall provide a franchisee at least ninety 2 29 days' prior written notice of termination, 2 30 cancellation, nonrenewal, or substantial change in 2 31 competitive circumstances. The notice shall state all 2 32 the reasons for termination, cancellation, nonrenewal, 2 33 or substantial change in competitive circumstances and 2 34 shall provide that the franchisee has sixty days in 2 35 which to rectify any claimed deficiency. If the 2 36 deficiency is rectified within sixty days the 2 37 termination, cancellation, nonrenewal, or substantial 2 38 change in competitive circumstances is void. The 2 39 notice provisions of this section shall not apply if 2 40 the reason for termination, cancellation, or 2 41 nonrenewal is insolvency, the occurrence of an 2 42 assignment for the benefit of creditors, or 2 43 bankruptcy. If the reason for termination, 2 44 cancellation, nonrenewal, or substantial change in 2 45 competitive circumstances is nonpayment of sums due 2 46 under the franchise, the franchisee is entitled to 2 47 written notice of such default, and has ten days in 2 48 which to remedy such default from the date of delivery 2 49 or posting of such notice. 2 50 Sec. 6. NEW SECTION. 523J.6 REPURCHASE OF 3 1 INVENTORIES. 3 2 If a franchise is terminated, cancelled, or not 3 3 renewed by the franchisor, the franchisor, at the 3 4 option of the franchisee, shall repurchase all 3 5 inventories sold by the franchisor to the franchisee 3 6 for resale under the franchise agreement at the fair 3 7 wholesale market value. This section applies only to 3 8 merchandise with a name, trademark, label, or other 3 9 mark on it which identifies the franchisor. 3 10 Sec. 7. NEW SECTION. 523J.7 APPLICATION TO 3 11 ARBITRATION AGREEMENTS. 3 12 This chapter does not apply to provisions for the 3 13 binding arbitration of disputes contained in a 3 14 franchise agreement if the criteria for determining 3 15 whether good cause exists for a termination, 3 16 cancellation, nonrenewal, or substantial change of 3 17 competitive circumstances, and the relief provided 3 18 under such provisions is no less than that provided 3 19 for in this chapter. 3 20 Sec. 8. NEW SECTION. 523J.8 ACTION FOR DAMAGES 3 21 AND INJUNCTIVE RELIEF. 3 22 A franchisee may bring an action against a 3 23 franchisor who violates this chapter in any court of 3 24 competent jurisdiction for damages sustained by the 3 25 franchisee as a consequence of the franchisor's 3 26 violation. Damages sought and awarded may include 3 27 actual costs of the action and reasonable attorney 3 28 fees. The franchisee may also be granted injunctive 3 29 relief against unlawful termination, cancellation, 3 30 nonrenewal, or substantial change of competitive 3 31 circumstances. 3 32 Sec. 9. NEW SECTION. 523J.9 TEMPORARY 3 33 INJUNCTIONS. 3 34 In an action brought by a franchisee against a 3 35 franchisor under this chapter, a violation of this 3 36 chapter by the franchisor is deemed to be an 3 37 irreparable injury to the franchisee for purposes of 3 38 determining if a temporary injunction should be 3 39 issued. 3 40 Sec. 10. NEW SECTION. 523J.10 ENCROACHMENT. 3 41 1. If a franchisor develops, or grants to a 3 42 franchisee the right to develop, a new outlet or 3 43 location which sells essentially the same goods or 3 44 services under the same trademark, service mark, trade 3 45 name, logotype, or other commercial symbol as an 3 46 existing franchisee and the new outlet or location has 3 47 an adverse effect on the gross sales of the existing 3 48 franchisee's outlet or location, the existing 3 49 adversely affected franchisee has a cause of action 3 50 for monetary damages in an amount calculated pursuant 4 1 to subsection 3, unless any of the following apply: 4 2 a. The franchisor has first offered the new outlet 4 3 or location to the existing franchisee on the same 4 4 basic terms and conditions available to the other 4 5 potential franchisee, or, if the new outlet or 4 6 location is to be owned by the franchisor, on the 4 7 terms and conditions that would ordinarily be offered 4 8 to a franchisee for a similarly situated outlet or 4 9 location. 4 10 b. The adverse impact on the existing franchisee's 4 11 annual gross sales, based on a comparison to the 4 12 annual gross sales from the existing outlet or 4 13 location during the twelve-month period immediately 4 14 preceding the opening of the new outlet or location, 4 15 is determined to have been less than five percent 4 16 during the first twelve months of operation of the new 4 17 outlet or location. 4 18 c. The existing franchisee, at the time the 4 19 franchisor develops, or grants to a franchisee the 4 20 right to develop, a new outlet or location, is not in 4 21 compliance with the franchisor's then current 4 22 reasonable criteria for eligibility for a new 4 23 franchise. A franchisee determined to be ineligible 4 24 pursuant to this paragraph shall be afforded the 4 25 opportunity to seek compensation pursuant to the 4 26 formal procedure established under paragraph "d", 4 27 subparagraph (2). Such procedure shall be the 4 28 franchisee's exclusive remedy. 4 29 d. The franchisor has established both of the 4 30 following: 4 31 (1) A formal procedure for hearing and acting upon 4 32 claims by an existing franchisee with regard to a 4 33 decision by the franchisor to develop, or grant to a 4 34 franchisee the right to develop, a new outlet or 4 35 location, prior to the opening of the new outlet or 4 36 location. 4 37 (2) A reasonable formal procedure for awarding 4 38 compensation or other form of consideration to a 4 39 franchisee to offset all or a portion of the 4 40 franchisee's lost profits caused by the establishment 4 41 of the new outlet or location. The procedure shall 4 42 involve, at the option of the franchisee, one of the 4 43 following: 4 44 (a) A panel, comprised of an equal number of 4 45 members selected by the franchisee and the franchisor, 4 46 and one additional member to be selected unanimously 4 47 by the members selected by the franchisee and the 4 48 franchisor. 4 49 (b) A neutral third-party mediator or an 4 50 arbitrator with the authority to make a decision or 5 1 award in accordance with the formal procedure. The 5 2 procedure shall be deemed reasonable if approved by a 5 3 majority of the franchisor's franchisees in the United 5 4 States, either individually or by an elected 5 5 representative body. 5 6 (c) Arbitration of any dispute before neutral 5 7 arbitrators pursuant to the rules of the American 5 8 arbitration association. The award of an arbitrator 5 9 pursuant to this subparagraph subdivision is subject 5 10 to judicial review pursuant to chapter 679A. 5 11 2. A franchisor shall establish and make available 5 12 to its franchisees a written policy setting forth its 5 13 reasonable criteria to be used by the franchisor to 5 14 determine whether an existing franchisee is eligible 5 15 for a franchise for an additional outlet or location. 5 16 3. a. In establishing damages under a cause of 5 17 action brought pursuant to this section, the 5 18 franchisee has the burden of proving the amount of 5 19 lost profits attributable to the compensable sales. 5 20 In any action brought under this section, the damages 5 21 payable shall be limited to no more than three years 5 22 of the proven lost profits. For purposes of this 5 23 subsection, "compensable sales" means the annual gross 5 24 sales from the existing outlet or location during the 5 25 twelve-month period immediately preceding the opening 5 26 of the new outlet or location less both of the 5 27 following: 5 28 (1) Five percent. 5 29 (2) The actual gross sales from the operation of 5 30 the existing outlet or location for the twelve-month 5 31 period immediately following the opening of the new 5 32 outlet or location. 5 33 b. Compensable sales shall exclude any amount 5 34 attributable to factors other than the opening and 5 35 operation of the new outlet or location. 5 36 4. Any cause of action brought under this section 5 37 must be filed within eighteen months of the opening of 5 38 the new outlet or location or within three months 5 39 after the completion of the procedure under subsection 5 40 1, paragraph "d", subparagraph (2), whichever is 5 41 later. 5 42 5. Upon petition by the franchisor or the 5 43 franchisee, the district court may grant a permanent 5 44 or preliminary injunction to prevent injury or 5 45 threatened injury for a violation of this section or 5 46 to preserve the status quo pending the outcome of the 5 47 formal procedure under subsection 1, paragraph "d", 5 48 subparagraph (2)." 5 49 #2. Title page, by striking lines 1 through 3 and 5 50 inserting the following: "An Act relating to certain 6 1 franchise and franchise agreements by establishing 6 2 rights and duties of a franchisor and franchisee, 6 3 and". 6 4 #3. By renumbering as necessary. 6 5 6 6 6 7 6 8 HEATON of Henry 6 9 HF 334.207 77 6 10 mj/jj/28
Text: H01192 Text: H01194 Text: H01100 - H01199 Text: H Index Bills and Amendments: General Index Bill History: General Index
© 1997 Cornell College and League of Women Voters of Iowa
Comments about this site or page? webmaster@legis.iowa.gov. Please remember that the person listed above does not vote on bills. Direct all comments concerning legislation to State Legislators.
Last update: Tue Mar 18 03:41:43 CST 1997
URL: /DOCS/GA/77GA/Legislation/H/01100/H01193/970317.html
jhf