2009 Iowa Code
Title 13 - Commerce
Subtitle 1 - Insurance and Related Regulation
CHAPTER 523H - FRANCHISES
523H.6 - ENCROACHMENT.

        523H.6  ENCROACHMENT.
         1.  If a franchisor develops, or grants to a franchisee the right
      to develop, a new outlet or location which sells essentially the same
      goods or services under the same trademark, service mark, trade name,
      logotype, or other commercial symbol as an existing franchisee and
      the new outlet or location has an adverse effect on the gross sales
      of the existing franchisee's outlet or location, the existing
      adversely affected franchisee has a cause of action for monetary
      damages in an amount calculated pursuant to subsection 3, unless any
      of the following apply:
         a.  The franchisor has first offered the new outlet or
      location to the existing franchisee on the same basic terms and
      conditions available to the other potential franchisee, or, if the
      new outlet or location is to be owned by the franchisor, on the terms
      and conditions that would ordinarily be offered to a franchisee for a
      similarly situated outlet or location.
         b.  The adverse impact on the existing franchisee's annual
      gross sales, based on a comparison to the annual gross sales from the
      existing outlet or location during the twelve-month period
      immediately preceding the opening of the new outlet or location, is
      determined to have been less than five percent during the first
      twelve months of operation of the new outlet or location.
         c.  The existing franchisee, at the time the franchisor
      develops, or grants to a franchisee the right to develop, a new
      outlet or location, is not in compliance with the franchisor's then
      current reasonable criteria for eligibility for a new franchise.  A
      franchisee determined to be ineligible pursuant to this paragraph
      shall be afforded the opportunity to seek compensation pursuant to
      the formal procedure established under paragraph "d",
      subparagraph (2).  Such procedure shall be the franchisee's exclusive
      remedy.
         d.  The franchisor has established both of the following:
         (1)  A formal procedure for hearing and acting upon claims by an
      existing franchisee with regard to a decision by the franchisor to
      develop, or grant to a franchisee the right to develop, a new outlet
      or location, prior to the opening of the new outlet or location.
         (2)  A reasonable formal procedure for awarding compensation or
      other form of consideration to a franchisee to offset all or a
      portion of the franchisee's lost profits caused by the establishment
      of the new outlet or location.  The procedure shall involve, at the
      option of the franchisee, one of the following:
         (a)  A panel, comprised of an equal number of members selected by
      the franchisee and the franchisor, and one additional member to be
      selected unanimously by the members selected by the franchisee and
      the franchisor.
         (b)  A neutral third-party mediator or an arbitrator with the
      authority to make a decision or award in accordance with the formal
      procedure.  The procedure shall be deemed reasonable if approved by a
      majority of the franchisor's franchisees in the United States, either
      individually or by an elected representative body.
         (c)  Arbitration of any dispute before neutral arbitrators
      pursuant to the rules of the American arbitration association.  The
      award of an arbitrator pursuant to this subparagraph division is
      subject to judicial review pursuant to chapter 679A.
         2.  A franchisor shall establish and make available to its
      franchisees a written policy setting forth its reasonable criteria to
      be used by the franchisor to determine whether an existing franchisee
      is eligible for a franchise for an additional outlet or location.
         3. a.  In establishing damages under a cause of action brought
      pursuant to this section, the franchisee has the burden of proving
      the amount of lost profits attributable to the compensable sales.  In
      any action brought under this section, the damages payable shall be
      limited to no more than three years of the proven lost profits.  For
      purposes of this subsection, "compensable sales" means the annual
      gross sales from the existing outlet or location during the
      twelve-month period immediately preceding the opening of the new
      outlet or location less both of the following:
         (1)  Five percent.
         (2)  The actual gross sales from the operation of the existing
      outlet or location for the twelve-month period immediately following
      the opening of the new outlet or location.
         b.  Compensable sales shall exclude any amount attributable to
      factors other than the opening and operation of the new outlet or
      location.
         4.  Any cause of action brought under this section must be filed
      within eighteen months of the opening of the new outlet or location
      or within three months after the completion of the procedure under
      subsection 1, paragraph "d", subparagraph (2), whichever is
      later.
         5.  Upon petition by the franchisor or the franchisee, the
      district court may grant a permanent or preliminary injunction to
      prevent injury or threatened injury for a violation of this section
      or to preserve the status quo pending the outcome of the formal
      procedure under subsection 1, paragraph "d", subparagraph (2).
      

         92 Acts, ch 1134, § 6; 95 Acts, ch 117, §3; 2009 Acts, ch 41, §263