2009 Iowa Code
Title 13 - Commerce
Subtitle 1 - Insurance and Related Regulation
CHAPTER 523H - FRANCHISES
523H.5 - TRANSFER OF FRANCHISE.

        523H.5  TRANSFER OF FRANCHISE.
         1.  A franchisee may transfer the franchised business and
      franchise to a transferee, provided that the transferee satisfies the
      reasonable current qualifications of the franchisor for new
      franchisees.  For the purposes of this section, a reasonable current
      qualification for a new franchisee is a qualification based upon a
      legitimate business reason.  If the proposed transferee does not meet
      the reasonable current qualifications of the franchisor, the
      franchisor may refuse to permit the transfer, provided that the
      refusal of the franchisor to consent to the transfer is not arbitrary
      or capricious.
         2.  Except as otherwise provided in this section, a franchisor may
      exercise a right of first refusal contained in a franchise agreement
      after receipt of a proposal from the franchisee to transfer the
      franchise.
         3.  A franchisor may require as a condition of a transfer any of
      the following:
         a.  That the transferee successfully complete a reasonable
      training program.
         b.  That a reasonable transfer fee be paid to reimburse the
      franchisor for the franchisor's reasonable and actual expenses
      directly attributable to the transfer.
         c.  That the franchisee pay or make provision reasonably
      acceptable to the franchisor to pay any amount due the franchisor or
      the franchisor's affiliate.
         d.  That the financial terms of the transfer comply at the
      time of the transfer with the franchisor's current financial
      requirements for franchisees.
         4.  A franchisee may transfer the franchisee's interest in the
      franchise, for the unexpired term of the franchise agreement, and a
      franchisor shall not require the franchisee or the transferee to
      enter into a new or different franchise agreement as a condition of
      the transfer.
         5.  A franchisee shall give the franchisor no less than sixty
      days' written notice of a transfer which is subject to the provisions
      of this section, and on request from the franchisor shall provide in
      writing the ownership interests of all persons holding or claiming an
      equitable or beneficial interest in the franchise subsequent to the
      transfer or the franchisee, as appropriate.  A franchisee shall not
      circumvent the intended effect of a contractual provision governing
      the transfer of the franchise or an interest in the franchise by
      means of a management agreement, lease, profit-sharing agreement,
      conditional assignment, or other similar device.
         6.  A franchisor shall not transfer its interest in a franchise
      unless the franchisor makes reasonable provision for the performance
      of the franchisor's obligations under the franchise agreement by the
      transferee.  For purposes of this subsection, "reasonable
      provision" means that upon the transfer, the entity assuming the
      franchisor's obligations has the financial means to perform the
      franchisor's obligations in the ordinary course of business, but does
      not mean that the franchisor transferring the franchise is required
      to guarantee obligations of the underlying franchise agreement.
         7.  A transfer by a franchisee is deemed to be approved sixty days
      after the franchisee submits the request for consent to the transfer
      unless the franchisor withholds consent to the transfer as evidenced
      in writing, specifying the reason or reasons for withholding the
      consent.  The written notice must be delivered to the franchisee
      prior to the expiration of the sixty-day period.  Any such notice is
      privileged and is not actionable based upon a claim of defamation.
         8.  A franchisor shall not discriminate against a proposed
      transferee of a franchise on the basis of race, color, national
      origin, religion, sex, or disability.
         9.  A franchisor, as a condition to a transfer of a franchise,
      shall not obligate a franchisee to undertake obligations or
      relinquish any rights unrelated to the franchise proposed to be
      transferred, or to enter into a release of claims broader than a
      similar release of claims by the franchisor against the franchisee
      which is entered into by the franchisor.
         10.  A franchisor, after a transfer of a franchise, shall not seek
      to enforce any covenant of the transferred franchise against the
      transferor which prohibits the transferor from engaging in any lawful
      occupation or enterprise.  However, this subsection does not prohibit
      the franchisor from enforcing a contractual covenant against the
      transferor not to exploit the franchisor's trade secrets or
      intellectual property rights, unless otherwise agreed to by the
      parties.
         11.  For purposes of this section, "transfer" means any change
      in ownership or control of a franchise, franchised business, or a
      franchisee.
         12.  The following occurrences shall not be considered transfers
      requiring the consent of the franchisor under a franchise agreement,
      and shall not result in the imposition of any penalties or make
      applicable any right of first refusal by the franchisor:
         a.  The succession of ownership of a franchise upon the death
      or disability of a franchisee, or of an owner of a franchise, to the
      surviving spouse, heir, or a partner active in the management of the
      franchisee unless the successor fails to meet within one year the
      then current reasonable qualifications of the franchisor for
      franchisees and the enforcement of the reasonable current
      qualifications is not arbitrary or capricious.
         b.  Incorporation of a proprietorship franchisee, provided
      that such incorporation does not prohibit a franchisor from requiring
      a personal guaranty by the franchisee of obligations related to the
      franchise.
         c.  A transfer within an existing ownership group of a
      franchise provided that more than fifty percent of the franchise is
      held by persons who meet the franchisor's reasonable current
      qualifications for franchisees.  If less than fifty percent of the
      franchise would be owned by persons who meet the franchisor's
      reasonable current qualifications, the franchisor may refuse to
      authorize the transfer, provided that enforcement of the reasonable
      current qualifications is not arbitrary or capricious.
         d.  A transfer of less than a controlling interest in the
      franchise to the franchisee's spouse or child or children, provided
      that more than fifty percent of the entire franchise is held by those
      who meet the franchisor's reasonable current qualifications.  If less
      than fifty percent of the franchise would be owned by persons who
      meet the franchisor's reasonable current qualifications, the
      franchisor may refuse to authorize the transfer, provided that
      enforcement of the reasonable current qualifications is not arbitrary
      or capricious.
         e.  A transfer of less than a controlling interest in the
      franchise of an employee stock ownership plan, or employee incentive
      plan, provided that more than fifty percent of the entire franchise
      is held by those who meet the franchisor's reasonable current
      qualifications for franchisees.  If less than fifty percent would be
      owned by persons who meet the franchisor's reasonable current
      qualifications, the franchisor may refuse to authorize the transfer,
      provided that enforcement of the reasonable current qualifications is
      not arbitrary or capricious.
         f.  A grant or retention of a security interest in the
      franchised business or its assets, or an ownership interest in the
      franchisee, provided the security agreement establishes an obligation
      on the part of the secured party enforceable by the franchisor to
      give the franchisor notice of the secured party's intent to foreclose
      on the collateral simultaneously with notice to the franchisee, and a
      reasonable opportunity to redeem the interests of the secured party
      and recover the secured party's interest in the franchise or
      franchised business by paying the secured obligation.
         13.  A franchisor shall not interfere or attempt to interfere with
      any disposition of an interest in a franchise or franchised business
      as described in subsection 12, paragraphs "a" through "f".
      

         92 Acts, ch 1134, § 5; 95 Acts, ch 117, §2