Text: HF00333 Text: HF00335 Text: HF00300 - HF00399 Text: HF Index Bills and Amendments: General Index Bill History: General Index
PAG LIN
1 1 Section 1. NEW SECTION. 537A.10 FRANCHISE AGREEMENTS.
1 2 1. DEFINITIONS. a. "Franchise" means an oral or written
1 3 agreement, either expressed or implied, which provides all of
1 4 the following:
1 5 (1) Grants the right to distribute goods or provide
1 6 services under a marketing plan prescribed or suggested in
1 7 substantial part by the franchisor.
1 8 (2) Requires payment of a franchise fee to a franchisor or
1 9 its affiliate.
1 10 (3) Allows the franchise business to be substantially
1 11 associated with a trademark, service mark, trade name,
1 12 logotype, advertisement, or other commercial symbol of or
1 13 designating the franchisor or its affiliate.
1 14 "Franchise" does not include any business that is operated
1 15 under a lease or license on the premises of the lessor or
1 16 licensor as long as such business is incidental to the
1 17 business conducted by the lessor or licensor on such premises,
1 18 including, without limitation, leased departments, licensed
1 19 departments, and concessions, if the leased or licensed
1 20 department operates only under the trademark, trade name,
1 21 service mark, or other commercial symbol designating the
1 22 lessor or licensor.
1 23 "Franchise" also does not include any contract under which
1 24 a petroleum retailer or petroleum distributor is authorized or
1 25 permitted to occupy leased marketing premises, which premises
1 26 are to be employed in connection with the sale, consignment,
1 27 or distribution of motor fuel under a trademark owned or
1 28 controlled by a refiner regulated by the federal Petroleum
1 29 Marketing Practices Act, 15 U.S.C. } 2801 et seq. "Refiner"
1 30 means a person engaged in the refining of crude oil to produce
1 31 motor fuel, and includes an affiliate of such person.
1 32 "Franchise" also does not include a contract entered into by
1 33 any person regulated under chapter 123, 322, 322A, 322B, 322C,
1 34 322D, 322F, 522, or 543B, or a contract establishing a
1 35 franchise relationship with respect to the sale of
2 1 construction equipment, lawn or garden equipment, or real
2 2 estate.
2 3 b. "Franchise agreement" means an agreement by which a
2 4 franchisor grants a franchise to a franchisee.
2 5 c. "Franchise fee" means a direct or indirect payment to
2 6 purchase or operate a franchise. Franchise fee does not
2 7 include any of the following:
2 8 (1) Payment of a reasonable service charge to the issuer
2 9 of a credit card by an establishment accepting the credit
2 10 card.
2 11 (2) Payment to a trading stamp company by a person issuing
2 12 trading stamps in connection with a retail sale.
2 13 (3) An agreement to purchase at a bona fide wholesale
2 14 price a reasonable quantity of tangible goods for resale.
2 15 (4) The purchase or agreement to purchase, at a fair
2 16 market value, any fixtures, equipment, leasehold improvements,
2 17 real property, supplies, or other materials reasonably
2 18 necessary to enter into or continue a business.
2 19 (5) Payments by a purchaser pursuant to a bona fide loan
2 20 from a seller to the purchaser.
2 21 (6) Payment of rent which reflects payment for the
2 22 economic value of leased real or personal property.
2 23 (7) The purchase or agreement to purchase promotional or
2 24 demonstration supplies, materials, or equipment furnished at
2 25 fair market value and not intended for resale.
2 26 d. "Franchisee" means a person to whom a franchise is
2 27 granted.
2 28 e. "Franchisor" means a person who grants a franchise.
2 29 2. A franchise agreement shall be deemed to include an
2 30 implied duty of good faith in performance and enforcement of
2 31 the agreement. "Good faith" means honesty in fact and the
2 32 observance of reasonable commercial standards of fair dealing
2 33 in the trade. The exercise of rights and the performance of
2 34 duties in the manner expressly authorized or contemplated by a
2 35 franchise agreement is not a breach of this subsection.
3 1 3. A franchisor may establish a formal procedure for
3 2 hearing and acting upon claims by a franchisee and for the
3 3 referral of such claims to one of the following:
3 4 a. A neutral third-party mediator.
3 5 b. A neutral arbitrator for arbitration pursuant to the
3 6 rules of the American arbitration association. The award of
3 7 an arbitrator pursuant to this subsection is subject to
3 8 judicial review pursuant to chapter 679A.
3 9 4. A provision in a franchise agreement that designates
3 10 jurisdiction or venue for litigation in a forum outside of
3 11 this state is void.
3 12 5. A condition, stipulation, or provision in a franchise
3 13 agreement requiring the application of the law of another
3 14 state is void.
3 15 Sec. 2. Chapter 523H, Code 1997, is repealed.
3 16 EXPLANATION
3 17 This bill repeals Code chapter 523H which governs certain
3 18 franchise agreements and creates new Code section 537A.10
3 19 which will govern the same types of franchise agreements.
3 20 The bill establishes the definition of key terms. The bill
3 21 provides that each franchise agreement shall be deemed to
3 22 include an implied duty of good faith, and defines "good
3 23 faith" as meaning honesty in fact and the observance of
3 24 reasonable commercial standards of fair dealing in the trade.
3 25 The bill provides that a franchisor may establish a formal
3 26 procedure for hearing and acting on franchisee claims
3 27 including mediation and arbitration. The bill provides that a
3 28 provision in a franchise agreement that designates
3 29 jurisdiction or venue for litigation in a forum outside of
3 30 this state is void, and that a condition, stipulation, or
3 31 provision in a franchise agreement requiring the application
3 32 of the law of another state is void.
3 33 Current Code chapter 523H is a general business franchise
3 34 statute and governs those franchise agreements which are not
3 35 governed by other more specific provisions and exempted under
4 1 the statute. Code Chapter 523H contains provisions relating
4 2 to the transfer of a franchise, encroachment of a new
4 3 franchise on an existing franchise, termination of a
4 4 franchise, nonrenewal of a franchise, and other miscellaneous
4 5 provisions.
4 6 LSB 2008HV 77
4 7 mj/jj/8
Text: HF00333 Text: HF00335 Text: HF00300 - HF00399 Text: HF Index Bills and Amendments: General Index Bill History: General Index
Iowa General Assembly
Search: House Bills and Amendments (77th General Assembly)
© 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: Wed Apr 15 03:43:13 CDT 1998
URL: /DOCS/GA/77GA/Legislation/HF/00300/HF00334/970224.html
jhf