(815 ILCS 705/3)
(from Ch. 121 1/2, par. 1703)
As used in this Act:
(1) "Franchise" means a contract or agreement, either expressed or
implied, whether oral or written, between two or more persons by which:
(a) a franchisee is granted the right to engage in
the business of offering, selling, or distributing goods or services, under a marketing plan or system prescribed or suggested in substantial part by a franchisor; and
(b) the operation of the franchisee's business
pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and
(c) the person granted the right to engage in such
business is required to pay to the franchisor or an affiliate of the franchisor, directly or indirectly, a franchise fee of $500 or more;
Provided that this Act shall not apply to any of the following persons,
entities or relationships which may involve or acquire a franchise or any
interest in a franchise:
(i) any franchised business which is operated by the
franchisee on the premises of the franchisor or subfranchisor as long as such franchised business is incidental to the business conducted by the franchisor or subfranchisor at such premises, including, without limitation, leased departments and concessions; or
(ii) a fractional franchise. A "fractional
franchise" means any relationship in which the person described therein as a franchisee, or any of the current directors or executive officers thereof, has been in the type of business represented by the franchise relationship for more than 2 years and the parties anticipated, or should have anticipated, at the time the agreement establishing the franchise relationship was reached, that the sales arising from the relationship would represent no more than 20% of the sales in dollar volume of the franchisee for a period of at least one year after the franchisee begins selling the goods or services involved in the franchise; or
(iii) a franchise agreement for the use of a
trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating a person who offers on a general basis, for a fee or otherwise, a bona fide service for the evaluation, testing, or certification of goods, commodities, or services; or
(iv) a franchise relationship covered by the
Petroleum Marketing Practices Act, 15 U.S.C. 2801.
(2) "Franchisee" means a person to whom a franchise is granted and
includes, unless stated otherwise in this Act: (a) a subfranchisor with
regard to its relationship with a franchisor and (b) a subfranchisee with
regard to its relationship with a subfranchisor.
(3) "Franchisor" means a person who grants a franchise and includes a
subfranchisor with regard to its relationship with a franchisee, unless
stated otherwise in this Act.
(4) "Subfranchise" means any contract or agreement between a franchisor
and a subfranchisor whereby the subfranchisor is granted the right, in
consideration of the payment of a franchise fee in whole or in part for
such right, to sell or negotiate the sale of
franchises. Where used in this Act, unless specifically stated otherwise,
"franchise" includes "subfranchise."
(5) "Subfranchisor" means a person to whom the right to sell or negotiate the sale of subfranchises
(6) "Order" means a consent, authorization, approval, prohibition, or
requirement applicable to a specific case issued by the Attorney General
(7) "Person" means an individual, a corporation, a partnership, a joint
venture, an association, a joint stock company, a trust, or an
(8) "Rule" means any published regulation or standard of general
application issued by the Administrator.
(9) "Sale" or "sell" includes every contract or agreement of sale of,
contract to sell, or disposition of, a franchise or interest in a franchise
(10) "State" means the State of Illinois.
(11) "Fraud" and "deceit" are not limited to common law fraud or deceit.
(12) "Offer" or "offer to sell" includes every attempt to offer to
dispose of, or solicitation of an offer to buy, a franchise, any interest
in a franchise or an option to acquire a franchise for value.
(13) "Publish" means publicly to issue or circulate by newspaper, mail,
radio, or television, or otherwise to disseminate to the public.
(14) "Franchise fee" means any fee or charge that a franchisee is
required to pay directly or indirectly for the right to enter into a
business or sell, resell, or distribute goods, services or franchises
under an agreement, including, but not limited to, any such payment for
goods or services, provided that the Administrator may by rule define what
constitutes an indirect franchise fee, and provided further that the
following shall not be considered the payment of a franchise fee: (a) the
payment of a reasonable service charge to the issuer of a credit card by an
establishment accepting or honoring such credit card; (b) amounts paid to a
trading stamp company by a person issuing trading stamps in connection with
the retail sale of merchandise or services; (c) the purchase or agreement
to purchase goods for which there is an established market at a bona fide
wholesale price; (d) the payment for fixtures necessary to operate the
business; (e) the payment of rent which reflects payment for the economic
value of the property; or (f) the purchase or agreement to purchase goods
for which there is an established market at a bona fide retail price
subject to a bona fide commission or compensation plan. The Administrator
may by rule define what shall constitute an established market.
(15) "Disclosure statement" means the document provided for in Section
16 of this Act and all amendments to such document.
(16) "Write" or "written" shall include printed, lithographed or any other
means of graphic communication.
(18) "Marketing plan or system" means a plan or system relating to some
aspect of the conduct of a party to a contract in conducting business,
including but not limited to (a) specification of price, or special pricing
systems or discount plans, (b) use of particular sales or display equipment
or merchandising devices, (c) use of specific sales techniques, (d) use of
advertising or promotional materials or cooperation in advertising efforts;
provided that an agreement is not a marketing plan or system solely because
a manufacturer or distributor of goods reserves the right to occasionally
require sale at a special reduced price which is advertised on the
container or packaging material in which the product is regularly sold, if
the reduced price is absorbed by the manufacturer or distributor.
(19) "Administrator" means the Illinois Attorney General.
(20) (a) An offer to sell a franchise is made in this
State when the offer either originates from this State or is directed by the offeror to this State and received at the place to which it is directed. An offer to sell is accepted in this State when acceptance is communicated to the offeror in this State; and acceptance is communicated to the offeror in this State when the offeree directs it to the offeror in this State reasonably believing the offeror to be in this State and it is received at the place to which it is directed.
(b) An offer to sell a franchise is not made in this
State merely because the franchisor circulates or there is circulated in this State an advertisement in (i) a bona fide newspaper or other publication of general, regular and paid circulation which has had more than 2/3 of its circulation outside this State during the past 12 months, or (ii) a radio or television program originating outside this State which is received in this State.
(21) "Franchise broker" means any person engaged in the business of
representing a franchisor in offering for sale or selling a franchise and
is not a franchisor, an affiliate of a franchisor or an officer, director or employee of a franchisor or an affiliate of a franchisor
with respect to such franchise. A franchisee shall not be a franchise
broker merely because it receives a payment from the franchisor in
consideration of the referral of a prospective franchisee to the
franchisor, if the franchisee does not otherwise participate in the sale of
a franchise to the prospective franchisee. A franchisee shall not be deemed
to participate in a sale merely because he responds to an inquiry from a
(22) "Salesperson" means any person employed by or representing a
franchise broker, a franchisor or an affiliate of the franchisor in effecting or attempting to effect the offer or sale
of a franchise.
(Source: P.A. 96-648, eff. 10-1-09.)
(815 ILCS 705/8)
(from Ch. 121 1/2, par. 1708)
(a) There shall be exempted, from the registration requirements of Section 10 of this Act, the offer and sale of a franchise if:
(1) the franchisor has a net worth on a consolidated
basis, according to its most recent audited financial statement, of not less than $15,000,000; or the franchisor has a net worth, according to its most recent unaudited financial statement, of not less than $1,000,000 and is at least 80% owned by a corporation which has a net worth on a consolidated basis, according to its most recent audited financial statement, of not less than $15,000,000;
(2) the franchisee (or its parent or any affiliates)
is an entity that has been in business for at least 5 years and has a net worth of at least $5,000,000; or
(3) one or more purchasers of at least 50% ownership
interest in the franchise within 60 days of the sale, has been, for at least 2 years, an officer, director, general partner, individual with management responsibility for the offer and sale of the franchisor's franchises or the administrator of the franchised network; or within 60 days of the sale, has been, for at least 2 years, an owner of at least a 25% interest in the franchisor.
Provided, unless exempted by order or rule of the Administrator, the franchisor shall deliver to the prospective franchisee a disclosure statement in accordance with the requirements of Section 5(2) of this Act in connection with any transaction exempted under this Section 8(a).
(b) There shall be exempted from the provisions of
Sections 5, 10, 11, and 15 of this Act the offer and sale of a franchise
if the prospective franchisee qualifies as one of the following:
any bank as defined in Section 3(a)(2) of the Securities Act of
1933 whether acting in its individual or fiduciary capacity or as an
insurance company as defined in Section 2(13) of that Act.
(Source: P.A. 96-648, eff. 10-1-09.)
(815 ILCS 705/22)
(from Ch. 121 1/2, par. 1722)
(a) The Administrator may suspend, terminate,
prohibit or deny the sale of any franchise or registration of any franchise
or salesperson if it appears to him that: (1) there has
been a failure to comply with any of the provisions of this Act or the rules
or orders of the Administrator pertaining thereto; or (2) that the disclosure
statement or any amendment thereto
includes any false or misleading statement of a material fact or omits to
any material fact required to be stated therein or necessary to make the
statements therein not misleading; or (3)
that the disclosure statement
filed in conjunction with an initial registration under
Section 10 is materially deficient. A disclosure statement is "materially
deficient" if it fails to comply with the requirements of Section 16;
or (4) that the sale of the
franchise would constitute
a misrepresentation, deceit or fraud upon prospective franchisees; or (5)
that any person in this State is engaging in or about to engage in false,
fraudulent or deceptive practices or any device, scheme, or artifice to defraud
in connection with the offer or sale of the franchise; or (6) that any person
identified in the disclosure statement or any person engaged in the offer
or sale of the franchise in this State has been convicted of an offense,
is subject to an order or civil judgment or is a defendant in a proceeding
required to be described in the disclosure statement and the involvement
of such person creates an unreasonable risk to prospective franchisees;
or (7) (blank); or (8) (blank); or (9) that the franchisor's enterprise
or method of business includes or would include activities which are illegal
where performed; or (10) (blank);
or (11) (blank).
In no case shall the Administrator, or any person designated by him, in
the administration of this Act, incur any official or personal liability by
issuing an order or other proceeding or by suspending, denying, prohibiting
or terminating the registration of a franchise broker or salesperson, or by
denying, suspending, terminating or prohibiting the registration of
franchises, or prohibiting the sale of franchises, or by suspending or
prohibiting any person from acting as a franchise broker or salesperson.
The Administrator may exercise any of the powers specified in Section 31 of
(b) The Administrator, with such assistance as he may from
time to time request of the state's attorneys in the several counties, may
institute proceedings in the circuit court to prevent and restrain
violations of this Act or of any rule or order prescribed or issued under
this Act. In such a proceeding, the court shall determine whether a
violation has been committed, and shall enter such judgment or decree as it
considers necessary to remove the effects of any violation and to prevent
such violation from continuing or from being renewed in the future. The
court, in its discretion, may exercise all powers necessary for this
purpose, including, but not limited to, injunction, revocation, forfeiture
or suspension of the charter, franchise, certificate of authority or
privileges of any corporation, association, limited partnership or other
business organization operating under the laws of this State, dissolution
of domestic corporations or associations, suspension or termination of the
right of foreign corporations or associations to do business in this State,
or restitution or payment of damages by a franchisor to persons injured by
violations of this Act, including without limitation an award of reasonable
attorneys fees and costs.
(Source: P.A. 96-648, eff. 10-1-09.)
(815 ILCS 705/26)
(from Ch. 121 1/2, par. 1726)
Private civil actions.
Any person who offers,
sells, terminates, or fails to renew a franchise in violation of this
Act shall be liable to the franchisee who may sue for damages caused
thereby. This amendatory Act of 1992 is intended to clarify the
existence of a private right of action under existing law with respect to
the termination or nonrenewal of a franchise in violation of this Act.
In the case of a violation of Section 5, 6, 10, 11, or 15 of the Act,
the franchisee may also sue for rescission.
No franchisee may sue for rescission under this Section 26 who
shall fail, within 30 days from the date of receipt thereof, to accept an
offer to return the consideration paid or to repurchase the franchise
purchased by such person. Every offer provided for in this Section shall
be in writing, shall be delivered to the franchisee or sent by certified
mail addressed to the franchisee at such person's last known address, shall
offer to return any consideration paid or to repurchase the franchise for a
price equal to the full amount paid less any net income received by the
franchisee, plus the legal rate of interest thereon, and may require the
franchisee to return to the person making such offer all unsold goods,
equipment, fixtures, leases and similar items received from such person.
Such offer shall continue in force for 30 days from the date on which it
was received by the franchisee and shall advise the franchisee of such
rights and the period of time limited for acceptance thereof. Any
agreement not to accept or refusing or waiving any such offer made during
or prior to the expiration of said 30 days shall be void.
The term "franchisee" as used in this Section shall include the personal
representative or representatives of the franchisee.
Every person who directly or indirectly controls a person liable under
this Section 26, every partner in a firm so liable, every principal
executive officer or director of a corporation so liable, every manager of a limited liability company so liable, every person
occupying a similar status or performing similar functions, and every
employee of a person so liable, who materially aids in the act or
transaction constituting the violation, is also liable jointly and severally
with and to the same extent as such person, unless said person who otherwise
is liable had no knowledge or reasonable basis to have knowledge of the
facts, acts or transactions constituting the alleged violation.
Every franchisee in whose favor judgment is entered in an action
brought under this Section shall be entitled to the costs of the action
including, without limitation, reasonable attorney's fees.
(Source: P.A. 96-648, eff. 10-1-09.)
(815 ILCS 705/31)
(from Ch. 121 1/2, par. 1731)
Powers of the Administrator.
(a) Investigations. The
Administrator may in his discretion: (1) make such public or private
investigations inside or outside this State as he deems necessary (i) to
determine whether any person has violated, is violating, or is about to
violate any provision of this Act or any rule or order prescribed or issued
under this Act or (ii) to aid in the enforcement of this Act or in the
prescribing of rules under this Act; and (2) publish information concerning
the violation of this Act or any rule or order prescribed or issued under
this Act. No actions taken or orders issued by the Administrator shall be
binding on, nor in any way preclude the Administrator from conducting any
investigation or commencing any action authorized under this Act. The
Administrator or any of his assistants may participate in any hearings
conducted by the Administrator under this Act and the Administrator may
provide such assistance as the Administrator believes necessary to
effectively fulfill the purposes of this Act.
(b) Subpoenas. For the purpose of any investigation or proceeding under
this Act and prior to the commencement of any civil or criminal action as
provided for in this Act, the Administrator has the authority to subpoena
witnesses, compel their attendance, examine them under oath, or require the
production of any books, documents, records or tangible things, hereafter
referred to as "documentary material", which the Administrator deems
relevant or material to his investigation, for inspection, reproducing or
copying under such terms and conditions as are hereafter set forth. Any
subpoena issued by the Administrator shall contain the following information:
(1) the statute and section thereof, the alleged violation of which is
under investigation; (2) the date, place and time at which the person is
required to appear or produce documentary material in his possession,
custody or control at a designated office of the Administrator, which date
shall not be less than 10 days from date of service of the subpoena; and
(3) where documentary material is required to be produced, the same shall
be prescribed by class so as to clearly indicate the material demanded.
(c) Production of documentary material. The Administrator is hereby
authorized, and may so elect to require the production, pursuant to this
Section of documentary material prior to the taking of any testimony of
the person subpoenaed, in which event such documentary material shall be
made available for inspection and copying during normal business hours at
the principal place of business of the person served, or at such other time
and place as may be agreed upon by the person served and the Administrator.
When documentary material is demanded by subpoena, said subpoena shall not
(1) contain any requirement which would be unreasonable or improper if
contained in a subpoena duces tecum issued by a court of this State; or (2)
require the disclosure of any documentary material which would be
privileged, or which for any other reason would not be required by a
subpoena duces tecum issued by a court of this State.
(d) Service of subpoenas. Service of a subpoena of the Administrator as
provided herein may be made by (1) delivery of a duly executed copy thereof
to the person served or if a person is not a natural person, to the
principal place of business of the person to be served, or (2) mailing by
certified mail, return receipt requested, a duly executed copy thereof
addressed to the person to be served at his principal place of business in
this State, or, if said person has no place of business in this State, to
his principal office.
(e) Examination of witnesses. The examination of all witnesses under
this Section shall be conducted by the Administrator, or by his deputy
designated by him, before an officer authorized to administer oaths in this
State. The testimony shall be taken stenographically or by a sound
recording device and shall be transcribed.
(f) Fees. All persons served with a subpoena by the Administrator under
this Act shall be paid the same fees and mileage as are paid to witnesses
in the courts of this State.
(g) Judicial enforcement of subpoenas. In the event a witness served
with a subpoena by the Administrator under this Act fails or refuses to
obey same or to produce documentary material as provided herein or to give
testimony relevant or material to the investigation being conducted, the
Administrator may petition any circuit court for an order requiring said
witness to attend and testify or produce the documentary material demanded.
Thereafter, any failure or refusal on the part of the witness to obey such
order of court may be punishable by the court as a contempt thereof.
(h) Immunity from prosecution. No person is excused from attending and
testifying or from producing any document or records before the
Administrator in obedience to the subpoena of the Administrator, in any
proceeding instituted by the Administrator and authorized by this Act, on
the ground that the testimony or evidence, documentary or otherwise,
required of him may tend to incriminate him or subject him to a penalty or
forfeiture. No individual may be prosecuted or subjected to any penalty or
forfeiture for or on account of any transaction, matter, or thing
concerning which he is compelled, after validly claiming his privilege
against self-incrimination, to testify or produce evidence, documentary or
otherwise, except that the individual testifying is not exempt from
prosecution and punishment for perjury or contempt committed in testifying.
(i) Administrator entitled to recover costs. In any action brought under
the provisions of this Act, the Administrator is entitled to recover costs
for the use of this State.
(j) In the administration of this Act, the Attorney General may accept an Assurance of Voluntary Compliance with respect to any method, act, or practice deemed to be violative of the Act from any person who has engaged in, is engaging in, or was about to engage in such method, act, or practice. Evidence of a violation of an Assurance of Voluntary Compliance shall be prima facie evidence of a violation of this Act in any subsequent proceeding brought by the Attorney General against the alleged violator. The Administrator may require that an Assurance of Voluntary Compliance be disclosed in the disclosure statement.
(Source: P.A. 96-648, eff. 10-1-09.)