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 franchisorfor new franchisees. For the purposes of this section, a reasonable current qualificationfor a new franchisee is a qualification based upon a legitimate business reason. If theproposed 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 franchisorto 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 totransfer 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. plete 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 thetransferee 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 franchisorshall provide in writing the ownership interests of all persons holding or claiming anequitable or beneficial interest in the franchise subsequent to the transfer or the franchisee,as appropriate. sorshall provide in writing the ownership interests of all persons holding or claiming anequitable 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 ofa management agreement, lease, profit-sharing agreement, conditional assignment, or othersimilar 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 franchiseagreement by the transferee. For purposes of this subsection, 'reasonable provision' meansthat upon the transfer, the entity assuming the franchisor’s obligations has the financialmeans to perform the franchisor’s obligations in the ordinary course of business, but doesnot mean that the franchisor transferring the franchise is required to guarantee obligationsof 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 tee obligationsof 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 thetransfer 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-dayperiod. 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 betransferred, or to enter into a release of claims broader than a similar release of claims by thefranchisor 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 ch 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 fromengaging in any lawful occupation or enterprise. However, this subsection does not prohibitthe franchisor from enforcing a contractual covenant against the transferor not to exploitthe franchisor’s trade secrets or intellectual property rights, unless otherwise agreed to bythe parties. Sat Dec 23 01:02:41 2023 Iowa Code 2024, Section 523H.5 (14, 0) §523H.5, FRANCHISES 2 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 anypenalties 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 themanagement of the franchisee unless n 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 themanagement of the franchisee unless the successor fails to meet within one year the thencurrent reasonable qualifications of the franchisor for franchisees and the enforcement ofthe 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 obligationsrelated 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 currentqualifications for franchisees. If less than fifty percent of the franchise would be ownedby persons who meet the franchisor’s reasonable current qualifications, the franchisormay refuse to authorize the transfer, provided that enforcement of the reasonable currentqualifications is not arbitrary or capricious. d. ranchisor’s reasonable current qualifications, the franchisormay refuse to authorize the transfer, provided that enforcement of the reasonable currentqualifications 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 bythose who meet the franchisor’s reasonable current qualifications. If less than fifty percentof the franchise would be owned by persons who meet the franchisor’s reasonable currentqualifications, the franchisor may refuse to authorize the transfer, provided that enforcementof 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 theentire franchise is held by those who meet the franchisor’s reasonable current qualificationsfor 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 thetransfer, provided that onsfor 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 thetransfer, provided that enforcement of the reasonable current qualifications is not arbitraryor 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 establishesan obligation on the part of the secured party enforceable by the franchisor to give thefranchisor notice of the secured party’s intent to foreclose on the collateral simultaneouslywith notice to the franchisee, and a reasonable opportunity to redeem the interests of thesecured party and recover the secured party’s interest in the franchise or franchised businessby 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 Sat Dec 23 01:02:41 2023 Iowa Code 2024, Section 523H.5 (14, 0)
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