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
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