CHAPTER 2.7. DECEPTIVE FRANCHISE PRACTICES
IC 23-2-2.7
Chapter 2.7. Deceptive Franchise Practices
IC 23-2-2.7-1
Franchise agreement; unlawful provisions
Sec. 1. It is unlawful for any franchise agreement entered intobetween any franchisor and a franchisee who is either a resident ofIndiana or a nonresident who will be operating a franchise in Indianato contain any of the following provisions:
(1) Requiring goods, supplies, inventories, or services to bepurchased exclusively from the franchisor or sources designatedby the franchisor where such goods, supplies, inventories, orservices of comparable quality are available from sources otherthan those designated by the franchisor. However, thepublication by the franchisor of a list of approved suppliers ofgoods, supplies, inventories, or service or the requirement thatsuch goods, supplies, inventories, or services comply withspecifications and standards prescribed by the franchisor doesnot constitute designation of a source nor does a reasonableright of the franchisor to disapprove a supplier constitute adesignation. This subdivision does not apply to the principalgoods, supplies, inventories, or services manufactured ortrademarked by the franchisor.
(2) Allowing the franchisor to establish a franchisor-ownedoutlet engaged in a substantially identical business to that of thefranchisee within the exclusive territory granted the franchiseeby the franchise agreement; or, if no exclusive territory isdesignated, permitting the franchisor to compete unfairly withthe franchisee within a reasonable area.
(3) Allowing substantial modification of the franchiseagreement by the franchisor without the consent in writing ofthe franchisee.
(4) Allowing the franchisor to obtain money, goods, services, orany other benefit from any other person with whom thefranchisee does business, on account of, or in relation to, thetransaction between the franchisee and the other person, otherthan for compensation for services rendered by the franchisor,unless the benefit is promptly accounted for, and transmitted tothe franchisee.
(5) Requiring the franchisee to prospectively assent to a release,assignment, novation, waiver, or estoppel which purports torelieve any person from liability to be imposed by this chapteror requiring any controversy between the franchisee and thefranchisor to be referred to any person, if referral would bebinding on the franchisee. This subdivision does not apply toarbitration before an independent arbitrator.
(6) Allowing for an increase in prices of goods provided by thefranchisor which the franchisee had ordered for private retailconsumers prior to the franchisee's receipt of an official priceincrease notification. A sales contract signed by a private retail
consumer shall constitute evidence of each order. Price changesapplicable to new models of a product at the time ofintroduction of such new models shall not be considered a priceincrease. Price increases caused by conformity to a state orfederal law, or the revaluation of the United States dollar in thecase of foreign-made goods, are not subject to this subdivision.
(7) Permitting unilateral termination of the franchise if suchtermination is without good cause or in bad faith. Good causewithin the meaning of this subdivision includes any materialviolation of the franchise agreement.
(8) Permitting the franchisor to fail to renew a franchise withoutgood cause or in bad faith. This chapter shall not prohibit afranchise agreement from providing that the agreement is notrenewable upon expiration or that the agreement is renewableif the franchisee meets certain conditions specified in theagreement.
(9) Requiring a franchisee to covenant not to compete with thefranchisor for a period longer than three (3) years or in an areagreater than the exclusive area granted by the franchiseagreement or, in absence of such a provision in the agreement,an area of reasonable size, upon termination of or failure torenew the franchise.
(10) Limiting litigation brought for breach of the agreement inany manner whatsoever.
(11) Requiring the franchisee to participate in any:
(A) advertising campaign or contest;
(B) promotional campaign;
(C) promotional materials; or
(D) display decorations or materials;
at an expense to the franchisee that is indeterminate, determinedby a third party, or determined by a formula, unless thefranchise agreement specifies the maximum percentage of grossmonthly sales or the maximum absolute sum that the franchiseemay be required to pay.
As added by Acts 1976, P.L.116, SEC.1. Amended by P.L.233-1985,SEC.5; P.L.11-1987, SEC.27.
IC 23-2-2.7-2
Franchise agreement; unlawful acts and practices
Sec. 2. It is unlawful for any franchisor who has entered into anyfranchise agreement with a franchisee who is either a resident ofIndiana or a nonresident operating a franchise in Indiana to engagein any of the following acts and practices in relation to theagreement:
(1) Coercing the franchisee to:
(i) order or accept delivery of any goods, supplies,inventories, or services which are neither necessary to theoperation of the franchise, required by the franchiseagreement, required by law, nor voluntarily ordered by thefranchisee; (ii) order or accept delivery of any goods offered for sale bythe franchisee which includes modifications or accessorieswhich are not included in the base price of those goods aspublicly advertised by the franchisor;
(iii) participate in an advertising campaign or contest, anypromotional campaign, promotional materials, displaydecorations, or materials at an expense to the franchisee overand above the maximum percentage of gross monthly salesor the maximum absolute sum required to be spent by thefranchisee provided for in the franchise agreement; in theabsence of such provision for required advertisingexpenditures in the franchise agreement, no suchparticipation may be required; or
(iv) enter into any agreement with the franchisor or anydesignee of the franchisor, or do any other act prejudicial tothe franchisee, by threatening to cancel or fail to renew anyagreement between the franchisee and the franchisor. Noticein good faith to any franchisee of the franchisee's violationof the terms or provisions of a franchise or agreement doesnot constitute a violation of this subdivision.
(2) Refusing or failing to deliver in reasonable quantities andwithin a reasonable time after receipt of an order from afranchisee for any goods, supplies, inventories, or serviceswhich the franchisor has agreed to supply to the franchisee,unless the failure is caused by acts or causes beyond the controlof the franchisor.
(3) Denying the surviving spouse, heirs, or estate of a deceasedfranchisee the opportunity to participate in the ownership of thefranchise under a valid franchise agreement for a reasonabletime after the death of the franchisee, provided that thesurviving spouse, heirs, or estate maintains all standards andobligations of the franchise.
(4) Establishing a franchisor-owned outlet engaged in asubstantially identical business to that of the franchisee withinthe exclusive territory granted the franchisee by the franchiseagreement or, if no exclusive territory is designated, competingunfairly with the franchisee within a reasonable area. However,a franchisor shall not be considered to be competing whenoperating a business either temporarily for a reasonable periodof time, or in a bona fide retail operation which is for sale toany qualified independent person at a fair and reasonable price,or in a bona fide relationship in which an independent personhas made a significant investment subject to loss in the businessoperation and can reasonably expect to acquire full ownershipof such business on reasonable terms and conditions.
(5) Discriminating unfairly among its franchisees orunreasonably failing or refusing to comply with any terms of afranchise agreement.
(6) Obtaining money, goods, services, or any other benefit fromany other person with whom the franchisee does business, on
account of, or in relation to, the transaction between thefranchisee and the other person, other than compensation forservices rendered by the franchisor, unless the benefit ispromptly accounted for, and transmitted to the franchisee.
(7) Increasing prices of goods provided by the franchisor whichthe franchisee had ordered for retail consumers prior to thefranchisee's receipt of a written official price increasenotification. Price increases caused by conformity to a state orfederal law, the revaluation of the United States dollar in thecase of foreign-made goods or pursuant to the franchiseagreement are not subject to this subdivision.
(8) Using deceptive advertising or engaging in deceptive acts inconnection with the franchise or the franchisor's business.
As added by Acts 1976, P.L.116, SEC.1. Amended by P.L.233-1985,SEC.6.
IC 23-2-2.7-3
Termination or election not to renew franchise; notice
Sec. 3. Unless otherwise provided in the agreement, anytermination of a franchise or election not to renew a franchise mustbe made on at least ninety (90) day's notice.
As added by Acts 1976, P.L.116, SEC.1.
IC 23-2-2.7-4
Action to recover damages or reform franchise agreement
Sec. 4. Any franchisee who is a party to a franchise agreemententered into or renewed after July 1, 1976 which contains anyprovision set forth in Section 1 of this chapter or who is injured byan unfair act or practice set forth in Section 2 of this chapter maybring an action to recover damages, or reform the franchiseagreement.
As added by Acts 1976, P.L.116, SEC.1.
IC 23-2-2.7-5
Franchise defined
Sec. 5. For the purposes of this chapter, franchise means anyfranchise as defined in IC 23-2-2.5-1, clauses (a) (1) (2) and (3), andany agreement meeting the provisions of IC 23-2-2.5-1, clauses (a)(1) and (2) which relates to the business of selling automobilesand/or trucks and the business of selling gasoline and/or oil primarilyfor use in vehicles with or without the sale of accessory items.
As added by Acts 1976, P.L.116, SEC.1.
IC 23-2-2.7-6
Application of chapter
Sec. 6. The provisions of this chapter apply only to agreementsentered into or renewed, or act or practice occurring after July 1,1976.
As added by Acts 1976, P.L.116, SEC.1.
IC 23-2-2.7-7
Limitation of actions
Sec. 7. No action may be brought for a violation of this chaptermore than two (2) years after the violation.
As added by Acts 1976, P.L.116, SEC.1.