Text: SSB01071 Text: SSB01073 Text: SSB01000 - SSB01099 Text: SSB 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. 1 3 When used in this section, unless the context otherwise 1 4 requires: 1 5 a. "Affiliate" means a person controlling, controlled by, 1 6 or under common control with another person, every officer or 1 7 director of such a person, and every person occupying a 1 8 similar status or performing similar functions. 1 9 b. "Business day" means a day other than a Saturday, 1 10 Sunday, or federal holiday. 1 11 c. (1) "Franchise" means either of the following: 1 12 (a) An oral or written agreement, either express or 1 13 implied, which provides all of the following: 1 14 (i) Grants the right to distribute goods or provide 1 15 services under a marketing plan prescribed or suggested in 1 16 substantial part by the franchisor. 1 17 (ii) Requires payment of a franchise fee to a franchisor 1 18 or its affiliate. 1 19 (iii) Allows the franchise business to be substantially 1 20 associated with a trademark, service mark, trade name, 1 21 logotype, advertisement, or other commercial symbol of or 1 22 designating the franchisor or its affiliate. 1 23 (b) A master franchise. 1 24 (2) "Franchise" does not include any business that is 1 25 operated under a lease or license on the premises of the 1 26 lessor or licensor as long as such business is incidental to 1 27 the business conducted by the lessor or licensor on such 1 28 premises, including, without limitation, leased departments, 1 29 licensed departments, and concessions and the leased or 1 30 licensed department operates only under the trademark, trade 1 31 name, service mark, or other commercial symbol designating the 1 32 lessor or licensor. 1 33 (3) "Franchise" also does not include any contract under 1 34 which a petroleum retailer or petroleum distributor is 1 35 authorized or permitted to occupy leased marketing premises, 2 1 which premises are to be employed in connection with the sale, 2 2 consignment, or distribution of motor fuel under a trademark 2 3 which is owned or controlled by a refiner which is regulated 2 4 by the federal Petroleum Marketing Practices Act, 15 U.S.C. } 2 5 2801 et seq. The term "refiner" means any person engaged in 2 6 the refining of crude oil to produce motor fuel, and includes 2 7 any affiliate of such person. "Franchise" also does not 2 8 include a contract entered into by any person regulated under 2 9 chapter 123, 322, 322A, 322B, 322C, 322D, 322F, 522, or 543B, 2 10 or a contract establishing a franchise relationship with 2 11 respect to the sale of construction equipment, lawn or garden 2 12 equipment, or real estate. 2 13 d. "Franchise fee" means a direct or indirect payment to 2 14 purchase or operate a franchise. Franchise fee does not 2 15 include any of the following: 2 16 (1) Payment of a reasonable service charge to the issuer 2 17 of a credit card by an establishment accepting the credit 2 18 card. 2 19 (2) Payment to a trading stamp company by a person issuing 2 20 trading stamps in connection with a retail sale. 2 21 (3) An agreement to purchase at a bona fide wholesale 2 22 price a reasonable quantity of tangible goods for resale. 2 23 (4) The purchase or agreement to purchase, at a fair 2 24 market value, any fixtures, equipment, leasehold improvements, 2 25 real property, supplies, or other materials reasonably 2 26 necessary to enter into or continue a business. 2 27 (5) Payments by a purchaser pursuant to a bona fide loan 2 28 from a seller to the purchaser. 2 29 (6) Payment of rent which reflects payment for the 2 30 economic value of leased real or personal property. 2 31 (7) The purchase or agreement to purchase promotional or 2 32 demonstration supplies, materials, or equipment furnished at 2 33 fair market value and not intended for resale. 2 34 e. "Franchisee" means a person to whom a franchise is 2 35 granted. Franchisee includes the following: 3 1 (1) A subfranchisor with regard to its relationship with a 3 2 franchisor. 3 3 (2) A subfranchisee with regard to its relationship with a 3 4 subfranchisor. 3 5 f. "Franchisor" means a person who grants a franchise or 3 6 master franchise, or an affiliate of such a person. 3 7 Franchisor includes a subfranchisor with regard to its 3 8 relationship with a franchisee, unless stated otherwise in 3 9 this section. 3 10 g. "Marketing plan" means a plan or system concerning a 3 11 material aspect of conducting business. Indicia of a 3 12 marketing plan include any of the following: 3 13 (1) Price specification, special pricing systems, or 3 14 discount plans. 3 15 (2) Sales or display equipment or merchandising devices. 3 16 (3) Sales techniques. 3 17 (4) Promotional or advertising materials or cooperative 3 18 advertising. 3 19 (5) Training regarding the promotion, operation, or 3 20 management of the business. 3 21 (6) Operational, managerial, technical, or financial 3 22 guidelines or assistance. 3 23 h. "Master franchise" means an agreement by which a person 3 24 pays a franchisor for the right to sell or negotiate the sale 3 25 of franchises. 3 26 i. "Offer" or "offer to sell" means every attempt to offer 3 27 or to dispose of, or solicitation of an offer to buy, a 3 28 franchise or interest in a franchise for value. 3 29 j. "Person" means a person as defined in section 4.1, 3 30 subsection 20. 3 31 k. "Sale" or "sell" means every contract or agreement of 3 32 sale of, contract to sell or disposition of, a franchise or 3 33 interest in a franchise for value. 3 34 l. "Subfranchise" means an agreement by which a person 3 35 pays a franchisor for the right to sell or negotiate the sale 4 1 of franchises. 4 2 m. "Subfranchisee" means a person who is granted a 4 3 franchise from a subfranchisor. 4 4 n. "Subfranchisor" means a person who is granted a master 4 5 franchise. 4 6 2. APPLICABILITY. This section applies to a new or 4 7 existing franchise that is operated in the state of Iowa. For 4 8 purposes of this section, the franchise is operated in this 4 9 state only if the premises from which the franchise is 4 10 operated is physically located in this state. For purposes of 4 11 this section, a franchise including marketing rights in or to 4 12 this state, is deemed to be operated in this state only if the 4 13 franchisee's principal business office is physically located 4 14 in this state. This section does not apply to a franchise 4 15 solely because an agreement relating to the franchise provides 4 16 that the agreement is subject to or governed by the laws of 4 17 this state. The provisions of this section do not apply to 4 18 any existing or future contracts between Iowa franchisors and 4 19 franchisees who operate franchises located out of state. 4 20 3. JURISDICTION OF DISPUTES. 4 21 a. A provision in a franchise agreement restricting 4 22 jurisdiction to a forum outside this state is void with 4 23 respect to a claim otherwise enforceable under this section. 4 24 b. A civil action or proceeding arising out of a franchise 4 25 may be commenced wherever jurisdiction over the parties or 4 26 subject matter exists, even if the agreement limits actions or 4 27 proceedings to a designated jurisdiction. 4 28 4. WAIVERS VOID. A condition, stipulation, or provision 4 29 requiring a franchisee to waive compliance with or relieving a 4 30 person of a duty or liability imposed by or a right provided 4 31 by this section or a rule or order under this section is void. 4 32 This subsection shall not affect the settlement of disputes, 4 33 claims, or civil lawsuits arising or brought pursuant to this 4 34 section. 4 35 5. TRANSFER OF FRANCHISE. 5 1 a. A franchisee may transfer the franchised business and 5 2 franchise to a transferee, provided that the transferee 5 3 satisfies the reasonable current qualifications of the 5 4 franchisor for new franchisees. For the purposes of this 5 5 subsection, a reasonable current qualification for a new 5 6 franchisee is a qualification based upon a legitimate business 5 7 reason. If the proposed transferee does not meet the 5 8 reasonable current qualifications of the franchisor, the 5 9 franchisor may refuse to permit the transfer, provided that 5 10 the refusal of the franchisor to consent to the transfer is 5 11 not arbitrary or capricious. 5 12 b. (1) A franchisee may transfer less than a controlling 5 13 interest in the franchise to an employee stock ownership plan, 5 14 or employee incentive plan provided that more than fifty 5 15 percent of the entire franchise is held by those who meet the 5 16 franchisor's reasonable current qualifications for 5 17 franchisees, and such transfer is approved by the franchisor. 5 18 Approval of such transfer shall not be unreasonably withheld. 5 19 (2) If pursuant to such a transfer less than fifty percent 5 20 of the entire franchise would be owned by persons who meet the 5 21 franchisor's reasonable current qualifications, the franchisor 5 22 may refuse to authorize the transfer, provided that 5 23 enforcement of the reasonable current qualifications is not 5 24 arbitrary or capricious. 5 25 (3) Participation by an employee in an employee stock 5 26 ownership plan or employee incentive plan established pursuant 5 27 to this subsection does not confer upon such employee any 5 28 right to access trade secrets protected under the franchise 5 29 agreement which access the employee would not otherwise have 5 30 if the employee did not participate in such plan. 5 31 c. A franchisor may require as a condition of a transfer 5 32 any of the following: 5 33 (1) That the transferee successfully complete a training 5 34 program. 5 35 (2) That a transfer fee be paid to reimburse the 6 1 franchisor for the franchisor's actual expenses directly 6 2 attributable to the transfer. 6 3 (3) That the franchisee pay or make provision acceptable 6 4 to the franchisor to pay any amount due the franchisor or the 6 5 franchisor's affiliate. 6 6 (4) That the financial terms of the transfer comply at the 6 7 time of the transfer with the franchisor's current financial 6 8 requirements for franchisees. 6 9 d. A franchisee shall give the franchisor no less than 6 10 sixty days' written notice of a transfer which is subject to 6 11 this subsection, and on request from the franchisor shall 6 12 provide in writing the ownership interests of all persons 6 13 holding or claiming an equitable or beneficial interest in the 6 14 franchise subsequent to the transfer or the franchisee, as 6 15 appropriate. A franchisee shall not circumvent the intended 6 16 effect of a contractual provision governing the transfer of 6 17 the franchise or an interest in the franchise by means of a 6 18 management agreement, lease, profit-sharing agreement, 6 19 conditional assignment, or other similar device. 6 20 e. A transfer by a franchisee is deemed to be approved 6 21 sixty days after the franchisee submits the request for 6 22 consent to the transfer unless the franchisor withholds 6 23 consent to the transfer as evidenced in writing, specifying 6 24 the reason or reasons for withholding the consent. The 6 25 written notice must be delivered to the franchisee prior to 6 26 the expiration of the sixty-day period. Any such notice is 6 27 privileged and is not actionable based upon a claim of 6 28 defamation. 6 29 f. A franchisor shall not deny the surviving spouse or a 6 30 child or children of a deceased or permanently disabled 6 31 franchisee the opportunity to participate in the ownership of 6 32 a franchise under a valid franchise agreement for a reasonable 6 33 period, which need not exceed one year, after the death or 6 34 disability of the franchisee. During such reasonable period, 6 35 the surviving spouse or the child or children of the 7 1 franchisee shall either meet all of the qualifications which 7 2 the franchisee was subject to at the time of the death or 7 3 disability of the franchisee, or sell, transfer, or assign the 7 4 franchise to a person who meets the franchisor's current 7 5 qualifications for a new franchisee. The rights granted 7 6 pursuant to this subsection are subject to the surviving 7 7 spouse or the child or children of the franchisee maintaining 7 8 all standards and obligations of the franchise. 7 9 g. Incorporation of a proprietorship franchise shall be 7 10 permitted upon sixty days' prior written notice to the 7 11 franchisor. Such incorporation does not prohibit a franchisor 7 12 from requiring a personal guaranty by the franchisee of 7 13 obligations related to the franchise, and the owners of the 7 14 corporation must meet the franchisor's reasonable current 7 15 qualifications for franchisees. 7 16 h. A transfer within an existing ownership group of a 7 17 franchise shall be permitted provided that the transferee 7 18 meets the franchisor's reasonable current qualifications for 7 19 franchisees, and written notice is submitted to the franchisor 7 20 sixty days prior to such a transfer. If less than fifty 7 21 percent of the franchise would be owned by persons who meet 7 22 the franchisor's reasonable current qualifications, the 7 23 franchisor may refuse to authorize the transfer, provided that 7 24 enforcement of the reasonable current qualifications is not 7 25 arbitrary or capricious. 7 26 6. ENCROACHMENT. 7 27 a. If a franchisor develops, or grants to a franchisee the 7 28 right to develop, a new outlet or location which sells 7 29 essentially the same goods or services under the same 7 30 trademark, service mark, trade name, logotype, or other 7 31 commercial symbol as an existing franchisee and the new outlet 7 32 or location is in unreasonable proximity to the existing 7 33 franchisee's outlet or location and has an adverse effect on 7 34 the gross sales of the existing franchisee's outlet or 7 35 location, the existing adversely affected franchisee has a 8 1 cause of action for monetary damages in an amount calculated 8 2 pursuant to paragraph "d", unless any of the following apply: 8 3 (1) The franchisor has first offered the new outlet or 8 4 location to the existing franchisee on the same basic terms 8 5 and conditions available to the other potential franchisee and 8 6 such existing franchisee meets the reasonable current 8 7 qualifications of the franchisor including any financial 8 8 requirements, or, if the new outlet or location is to be owned 8 9 by the franchisor, on the terms and conditions that would 8 10 ordinarily be offered to a franchisee for a similarly situated 8 11 outlet or location. 8 12 (2) The adverse impact on the existing franchisee's annual 8 13 gross sales, based on a comparison to the annual gross sales 8 14 from the existing outlet or location during the twelve-month 8 15 period immediately preceding the opening of the new outlet or 8 16 location, is determined to have been less than six percent 8 17 during the first twelve months of operation of the new outlet 8 18 or location. 8 19 (3) The existing franchisee, at the time the franchisor 8 20 develops, or grants to a franchisee the right to develop, a 8 21 new outlet or location, is not in compliance with the 8 22 franchisor's then current reasonable criteria for eligibility 8 23 for a new franchise, not including any financial requirements. 8 24 (4) The existing franchisee has been granted reasonable 8 25 territorial rights and the new outlet or location does not 8 26 violate those territorial rights. 8 27 b. (1) The franchisor, with respect to claims made under 8 28 paragraph "a", shall establish both of the following: 8 29 (a) A formal procedure for hearing and acting upon claims 8 30 by an existing franchisee with regard to a decision by the 8 31 franchisor to develop, or grant to a franchisee the right to 8 32 develop, a new outlet or location, prior to the opening of the 8 33 new outlet or location. 8 34 (b) A reasonable formal procedure for mediating a dispute 8 35 resulting in an award of compensation or other form of 9 1 consideration to a franchisee to offset all or a portion of 9 2 the franchisee's lost profits caused by the establishment of 9 3 the new outlet or location. The procedure shall involve a 9 4 neutral third-party mediator. The procedure shall be deemed 9 5 reasonable if approved by a majority of the franchisor's 9 6 franchisees in the United States. 9 7 (2) A dispute submitted to a formal procedure under 9 8 subparagraph (1) does not diminish the rights of a franchisor 9 9 or franchisee to bring a cause of action for a violation of 9 10 this subsection if no settlement results from such procedure. 9 11 c. A franchisor shall establish and make available to its 9 12 franchisees a written policy setting forth its reasonable 9 13 criteria to be used by the franchisor to determine whether an 9 14 existing franchisee is eligible for a franchise for an 9 15 additional outlet or location. 9 16 d. (1) In establishing damages under a cause of action 9 17 brought pursuant to this subsection, the franchisee has the 9 18 burden of proving the amount of lost profits attributable to 9 19 the compensable sales. In any action brought under this 9 20 subsection, the damages payable shall be limited to no more 9 21 than three years of the proven lost profits. For purposes of 9 22 this paragraph, "compensable sales" means the annual gross 9 23 sales from the existing outlet or location during the twelve- 9 24 month period immediately preceding the opening of the new 9 25 outlet or location less both of the following: 9 26 (a) Six percent of the annual gross sales for that twelve- 9 27 month period immediately preceding the opening of the new 9 28 outlet or location. 9 29 (b) The actual gross sales from the operation of the 9 30 existing outlet or location for the twelve-month period 9 31 immediately following the opening of the new outlet or 9 32 location. 9 33 (2) Compensable sales shall exclude any amount 9 34 attributable to factors other than the opening and operation 9 35 of the new outlet or location. 10 1 e. Any cause of action brought under this subsection must 10 2 be filed within eighteen months of the opening of the new 10 3 outlet or location or within thirty days after the completion 10 4 of the procedure under paragraph "b", subparagraph (1), 10 5 whichever is later. 10 6 7. TERMINATION. 10 7 a. Except as otherwise provided by this section, a 10 8 franchisor shall not terminate a franchise prior to the 10 9 expiration of its term except for good cause. For purposes of 10 10 this subsection, "good cause" is cause based upon a legitimate 10 11 business reason. "Good cause" includes the failure of the 10 12 franchisee to comply with any material lawful requirement of 10 13 the franchise agreement, provided that the termination by the 10 14 franchisor is not arbitrary or capricious. 10 15 b. Prior to termination of a franchise for good cause, a 10 16 franchisor shall provide a franchisee with written notice 10 17 stating the basis for the proposed termination. After service 10 18 of written notice, the franchisee shall have a reasonable 10 19 period of time to cure the default, which in no event need be 10 20 more than ten days for nonpayment of moneys due under the 10 21 franchise agreement nor more than thirty days for 10 22 noncompliance with any other material provision of the 10 23 franchise agreement. 10 24 c. Notwithstanding paragraph "b", a franchisor may 10 25 terminate a franchisee upon written notice and without an 10 26 opportunity to cure if any of the following apply: 10 27 (1) The franchisee or the business to which the franchise 10 28 relates is declared bankrupt or judicially determined to be 10 29 insolvent. 10 30 (2) All or a substantial part of the assets of the 10 31 franchise or the business to which the franchisee relates are 10 32 assigned to or for the benefit of any creditor which is 10 33 subject to chapter 681. An assignment for the benefit of any 10 34 creditor pursuant to this subparagraph does not include the 10 35 granting of a security interest in the normal course of 11 1 business. 11 2 (3) The franchisee voluntarily abandons the franchise by 11 3 failing to operate the business for five consecutive business 11 4 days during which the franchisee is required to operate the 11 5 business under the terms of the franchise, or any shorter 11 6 period after which it is not unreasonable under the facts and 11 7 circumstances for the franchisor to conclude that the 11 8 franchisee does not intend to continue to operate the 11 9 franchise, unless the failure to operate is due to 11 10 circumstances beyond the control of the franchisee. 11 11 (4) The franchisor and franchisee agree in writing to 11 12 terminate the franchise. 11 13 (5) The franchisee knowingly makes any material 11 14 misrepresentations or knowingly omits to state any material 11 15 facts relating to the acquisition or ownership or operation of 11 16 the franchise business. 11 17 (6) The franchisee repeatedly fails to comply with one or 11 18 more material provisions of the franchise agreement, when the 11 19 enforcement of such material provisions is not arbitrary or 11 20 capricious, whether or not the franchisee complies after 11 21 receiving notice of the failure to comply. 11 22 (7) The franchised business or business premises of the 11 23 franchisee are lawfully seized, taken over, or foreclosed by a 11 24 government authority or official. 11 25 (8) The franchisee is convicted of a felony or any other 11 26 criminal misconduct which materially and adversely affects the 11 27 operation, maintenance, or goodwill of the franchise in the 11 28 relevant market. 11 29 (9) The franchisee operates the franchised business in a 11 30 manner that imminently endangers the public health and safety. 11 31 8. NONRENEWAL OF A FRANCHISE. 11 32 a. A franchisor shall not refuse to renew a franchise 11 33 unless both of the following apply: 11 34 (1) The franchisee has been notified of the franchisor's 11 35 intent not to renew at least six months prior to the 12 1 expiration date or any extension of the franchise agreement. 12 2 (2) Any of the following circumstances exist: 12 3 (a) Good cause exists, provided that the refusal of the 12 4 franchisor to renew is not arbitrary or capricious. For 12 5 purposes of this subsection, "good cause" means cause based on 12 6 a legitimate business reason. 12 7 (b) The franchisor and franchisee agree not to renew the 12 8 franchise. 12 9 (c) The franchisor completely withdraws from directly or 12 10 indirectly distributing its products or services in the 12 11 geographic market served by the franchisee, provided that upon 12 12 expiration of the franchise, the franchisor agrees not to seek 12 13 to enforce any covenant of the nonrenewed franchisee not to 12 14 compete with the franchisor or franchisees of the franchisor. 12 15 b. As a condition of renewal of the franchise, a franchise 12 16 agreement may require that the franchisee meet the then 12 17 current requirements for franchises and that the franchisee 12 18 execute a new agreement incorporating the then current terms 12 19 and fees for new franchises. 12 20 9. INDEPENDENT SOURCING. 12 21 a. Except as provided in paragraph "b", a franchisor shall 12 22 allow a franchisee to obtain equipment, fixtures, supplies, 12 23 and services used in the establishment and operation of the 12 24 franchised business from sources of the franchisee's choosing, 12 25 provided that such goods and services meet standards as to 12 26 their nature and quality prescribed by the franchisor. 12 27 b. Paragraph "a" does not apply to reasonable quantities 12 28 of inventory goods or services, including display and sample 12 29 items, that the franchisor requires the franchisee to obtain 12 30 from the franchisor or its affiliate, but only if the goods or 12 31 services are central to the franchised business and either are 12 32 actually manufactured or produced by the franchisor or its 12 33 affiliate, or incorporate a trade secret owned by the 12 34 franchisor or its affiliate. 12 35 10. FRANCHISEE'S RIGHT TO ASSOCIATE. A franchisor shall 13 1 not restrict a franchisee from associating with other 13 2 franchisees or from participating in a trade association, and 13 3 shall not retaliate against a franchisee for engaging in these 13 4 activities. 13 5 11. DUTY OF GOOD FAITH. A franchise imposes on the 13 6 parties a duty of good faith in performance and enforcement of 13 7 the franchise agreement. "Good faith" means honesty in fact 13 8 and the observance of reasonable commercial standards of fair 13 9 dealing in the trade. 13 10 The duty of good faith applies where the franchisor opens a 13 11 new outlet or location, or channel of distribution, which has 13 12 an adverse impact on an existing franchisee. 13 13 12. PRIVATE CIVIL ACTION. A person who violates a 13 14 provision of this section or order issued under this section 13 15 is liable for damages caused by the violation, including, but 13 16 not limited to, costs and reasonable attorneys' and experts' 13 17 fees, and subject to other appropriate relief including 13 18 injunctive and other equitable relief. 13 19 13. CHOICE OF LAW. A condition, stipulation, or provision 13 20 requiring the application of the law of another state in lieu 13 21 of this section is void. 13 22 14. CONSTRUCTION WITH OTHER LAW. This section does not 13 23 limit any liability that may exist under another statute or at 13 24 common law. Prior law governs all actions based on facts 13 25 occurring before July 1, 1999. 13 26 15. CONSTRUCTION. This section shall be liberally 13 27 construed to effectuate its purposes. 13 28 16. SEVERABILITY. If any provision or clause of this 13 29 section or any application of this section to any person or 13 30 circumstances is held invalid, such invalidity shall not 13 31 affect other provisions or applications of the section which 13 32 can be given effect without the invalid provision or 13 33 application, and to this end the provisions of this section 13 34 are declared to be severable. 13 35 Sec. 2. Chapter 523H, Code 1999, is repealed. 14 1 EXPLANATION 14 2 This bill repeals Code chapter 523H relating to franchises 14 3 and creates new Code section 537A.10 relating to franchise 14 4 agreements. Chapter 537A pertains to contracts. 14 5 Subsection 1 of the new Code section establishes 14 6 definitions of key terms used in the section. 14 7 Subsection 2 provides for the section's applicability. The 14 8 section applies to a new or existing franchise that is 14 9 operated in this state. The section does not apply to any 14 10 existing or future contracts between Iowa franchisors and 14 11 franchisees who operate franchises located out of state. 14 12 Subsection 3 provides for the jurisdiction of disputes and 14 13 prohibits as unenforceable a provision in the franchise 14 14 agreement that attempts to restrict jurisdiction to a forum 14 15 outside of this state. 14 16 Subsection 4 provides that a provision requiring a 14 17 franchisee to waive compliance with or relieving a person of a 14 18 duty or liability imposed by or a right provided by this 14 19 section is void. 14 20 Subsection 5 establishes certain rights and restrictions 14 21 related to the transfer of a franchise. 14 22 Subsection 6 defines encroachment and establishes a 14 23 mechanism for the calculation of monetary damages associated 14 24 with the encroachment. The subsection provides that a 14 25 franchisee has a cause of action under the encroachment 14 26 provision unless the franchisor has first offered the new 14 27 outlet or location to the existing franchisee on the same 14 28 basic terms and conditions available to other potential 14 29 franchisees, unless the adverse impact on the existing 14 30 franchisee's annual gross sales is determined pursuant to a 14 31 statutory formula to have been less than 6 percent during the 14 32 first 12 months of operation of the new outlet or location, 14 33 unless the existing franchisee is not in compliance with the 14 34 franchisor's then current reasonable criteria for eligibility 14 35 for a new franchise, or unless the existing franchisee has 15 1 been granted reasonable territorial rights and the new outlet 15 2 or location does not violate those territorial rights. The 15 3 subsection provides that the franchisor, with respect to 15 4 encroachment claims, must establish a formal procedure for 15 5 hearing and acting upon claims by an existing franchisee with 15 6 regard to a decision by the franchisor to develop a new outlet 15 7 or location prior to such development, and a reasonable formal 15 8 procedure for mediating a dispute resulting in an award of 15 9 compensation or other form of consideration to offset all or a 15 10 portion of the franchisee's lost profits caused by the 15 11 encroachment. 15 12 Subsection 7 relates to termination of a franchise and 15 13 provides that a franchisor shall not terminate a franchise 15 14 prior to the expiration of its term except for good cause. 15 15 Prior to termination for good cause, the franchisor must 15 16 provide the franchisee with written notice stating the basis 15 17 for the proposed termination. After written notice, the 15 18 franchisee shall have a reasonable time to cure the default 15 19 resulting in the notice. The subsection sets forth certain 15 20 instances where the franchisor may terminate the franchise 15 21 upon written notice and without an opportunity to cure. 15 22 Subsection 8 pertains to the nonrenewal of a franchise. 15 23 The subsection provides that the franchisor must not refuse to 15 24 renew a franchise unless the franchisee has been notified of 15 25 the franchisor's intent not to renew at least six months prior 15 26 to the expiration date or any extension of the franchise 15 27 agreement, along with the existence of one of several 15 28 circumstances set forth in the subsection. 15 29 Subsection 9 provides that a franchisor must allow a 15 30 franchisee to obtain equipment, fixtures, supplies, and 15 31 services used in the establishment and operation of the 15 32 franchised business from sources of the franchisee's choosing, 15 33 provided that such goods and services meet standards as to 15 34 their nature and quality prescribed by the franchisor. This 15 35 subsection does not apply to reasonable quantities of 16 1 inventory goods or services, including display and sample 16 2 items, that the franchisor requires the franchisee to obtain 16 3 from the franchisor or its affiliate, but only if the goods or 16 4 services are central to the franchised business and either are 16 5 actually manufactured or produced by the franchisor or its 16 6 affiliate, or incorporate a trade secret owned by the 16 7 franchisor or its affiliate. 16 8 Subsection 10 provides that a franchisor shall not restrict 16 9 a franchisee from associating with other franchisees. 16 10 Subsection 11 imposes a duty of good faith on the parties 16 11 in the performance and enforcement of the franchise agreement. 16 12 Subsection 12 provides a private civil cause of action. A 16 13 person who violates a provision of the section is liable for 16 14 damages caused by the violation including, but not limited to, 16 15 costs and reasonable attorneys and experts fees, as well as 16 16 other appropriate relief including injunctive and other 16 17 equitable relief. 16 18 Subsection 13 provides that a condition, stipulation, or 16 19 provision requiring the application of the law of another 16 20 state in lieu of this section is void. 16 21 Subsection 14 provides that the section does not limit any 16 22 liability that may exist under another statute or at common 16 23 law. 16 24 Subsection 15 provides that the section is to be liberally 16 25 construed to effectuate its purpose. 16 26 Subsection 16 provides that if any provision or clause of 16 27 the section is held invalid, the invalidity shall not affect 16 28 other provisions that can be given effect without the invalid 16 29 provision. 16 30 LSB 1814XC 78 16 31 mj/cf/24.1
Text: SSB01071 Text: SSB01073 Text: SSB01000 - SSB01099 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
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