§ 23-2-2.7-1 — Franchise agreement; unlawful provisions

Indiana § 23-2-2.7-1

• Jurisdiction: Indiana
• Title 23: BUSINESS AND OTHER ASSOCIATIONS
• Art. 2: SECURITIES AND FRANCHISES
• Ch. 2.7: Deceptive Franchise Practices

Text

It is unlawful for any franchise agreement
entered into between any franchisor and a franchisee who is either a
resident of Indiana or a nonresident who will be operating a franchise
in Indiana to contain any of the following provisions:
(1) Requiring goods, supplies, inventories, or services to be
purchased exclusively from the franchisor or sources designated
by the franchisor where such goods, supplies, inventories, or
services of comparable quality are available from sources other
than those designated by the franchisor. However, the publication
by the franchisor of a list of approved suppliers of goods,
supplies, inventories, or service or the requirement that such
goods, supplies, inventories, or services comply with
specifications and standards prescribed by the franchisor does not
constitute designation of a source nor does a reasonable right of
the franchisor to disapprove a supplier constitute a designation.
This subdivision does not apply to the principal goods, supplies,
inventories, or services manufactured or trademarked by the
franchisor.
(2) Allowing the franchisor to establish a franchisor-owned outlet
engaged in a substantially identical business to that of the
franchisee within the exclusive territory granted the franchisee by
the franchise agreement; or, if no exclusive territory is designated,
permitting the franchisor to compete unfairly with the franchisee
within a reasonable area.
(3) Allowing substantial modification of the franchise agreement
by the franchisor without the consent in writing of the franchisee.
(4) Allowing the franchisor to obtain money, goods, services, or
any other benefit from any other person with whom the franchisee
does business, on account of, or in relation to, the transaction
between the franchisee and the other person, other than for
compensation for services rendered by the franchisor, unless the
benefit is promptly accounted for, and transmitted to the
franchisee.
(5) Requiring the franchisee to prospectively assent to a release,
assignment, novation, waiver, or estoppel which purports to
relieve any person from liability to be imposed by this chapter or
requiring any controversy between the franchisee and the
franchisor to be referred to any person, if referral would be
binding on the franchisee. This subdivision does not apply to
arbitration before an independent arbitrator.
(6) Allowing for an increase in prices of goods provided by the
franchisor which the franchisee had ordered for private retail
consumers prior to the franchisee's receipt of an official price
increase notification. A sales contract signed by a private retail
consumer shall constitute evidence of each order. Price changes
applicable to new models of a product at the time of introduction
of such new models shall not be considered a price increase. Price
increases caused by conformity to a state or federal law, or the
revaluation of the United States dollar in the case of foreign-made
goods, are not subject to this subdivision.
(7) Permitting unilateral termination of the franchise if such
termination is without good cause or in bad faith. Good cause
within the meaning of this subdivision includes any material
violation of the franchise agreement.
(8) Permitting the franchisor to fail to renew a franchise without
good cause or in bad faith. This chapter shall not prohibit a
franchise agreement from providing that the agreement is not
renewable upon expiration or that the agreement is renewable if
the franchisee meets certain conditions specified in the
agreement.
(9) Requiring a franchisee to covenant not to compete with the
franchisor for a period longer than three (3) years or in an area
greater than the exclusive area granted by the franchise agreement
or, in absence of such a provision in the agreement, an area of
reasonable size, upon termination of or failure to renew the
franchise.
(10) Limiting litigation brought for breach of the agreement in
any 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, determined
by a third party, or determined by a formula, unless the franchise
agreement specifies the maximum percentage of gross monthly
sales or the maximum absolute sum that the franchisee may 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.