Senate File 2277 - Introduced SENATE FILE 2277 BY COMMITTEE ON ECONOMIC GROWTH (SUCCESSOR TO SF 2084) A BILL FOR An Act relating to the sources of goods or services under a 1 franchise agreement. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5724SV (1) 86 gh/nh
S.F. 2277 Section 1. Section 537A.10, subsection 9, paragraph b, Code 1 2016, is amended to read as follows: 2 b. However, the publication by the franchisor of a list 3 of approved suppliers of goods, supplies, inventories, or 4 services, or the requirement that such goods, supplies, 5 inventories, or services comply with customary and reasonable 6 specifications and standards prescribed by the franchisor, 7 does not constitute designation of a source. Additionally, 8 the reasonable right of a franchisor to disapprove a supplier 9 does not constitute a designation of source. This subsection 10 does not apply to the principal goods, supplies, inventories, 11 or services manufactured by the franchisor, except for motor 12 oil that is labeled in accordance with the requirements of 13 the American petroleum institute, or such goods, supplies, 14 inventories, or services entitled to protection as a trade 15 secret. 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanation’s substance by the members of the general assembly. 19 This bill relates to the sources of goods or services under 20 a franchise agreement. 21 Under current Code section 537A.10(9), a franchisor cannot 22 require a franchisee to purchase goods or services exclusively 23 from the franchisor or from a specific source designated by 24 the franchisor if goods or services of comparable quality are 25 available from other sources. A franchisor may publish a list 26 of approved suppliers of goods or services or require that such 27 goods or services comply with standards and specifications. 28 A franchisor also has the reasonable right to disapprove a 29 supplier. This provision does not apply to the principal goods 30 or services manufactured by a franchisor or such goods or 31 services entitled to trade secret protection. 32 The bill amends current law to limit the ability of a 33 franchisor to prescribe specifications and standards regarding 34 the purchase of goods or services to specifications and 35 -1- LSB 5724SV (1) 86 gh/nh 1/ 2
S.F. 2277 standards that are customary and reasonable. The bill 1 also amends current law to provide that a franchisor cannot 2 designate a source for a franchisee’s purchase of motor oil 3 labeled in accordance with the requirements of the American 4 petroleum institute. 5 -2- LSB 5724SV (1) 86 gh/nh 2/ 2