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91_SB0379
LRB9101266LDmbE
1 AN ACT to create the Illinois Franchise and
2 Distributorship Act.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 ARTICLE I
6 GENERAL PROVISIONS
7 Section 1-1. Short title. This Act may be cited as the
8 Illinois Franchise and Distributorship Act.
9 Section 1-5. Findings and purpose.
10 (1) The General Assembly finds and declares that the
11 sale of franchises is a widespread business activity.
12 Illinois residents have suffered substantial losses where
13 franchisors or their representatives have not provided full
14 and complete information regarding the franchisor-franchisee
15 relationship, the details of the contract between the
16 franchisor and franchisee, the prior business experience of
17 the franchisor and other factors relevant to the franchise
18 offered for sale.
19 (2) It is the intent of this Act: (a) to provide each
20 prospective franchisee with the information necessary to make
21 an intelligent decision regarding franchises being offered
22 for sale; and (b) to protect the franchisee and the
23 franchisor by providing a better understanding of the
24 business and the legal relationship between the franchisee
25 and the franchisor.
26 Section 1-10. Participation in trade associations. It
27 shall be an unfair franchise practice and a violation of this
28 Act for a franchisor to in any way restrict any franchisee
29 from joining or participating in any trade association.
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1 Section 1-15. Franchise Advisory Board. There is
2 created in the Office of the Administrator a Franchise
3 Advisory Board. The Franchise Advisory Board shall consist
4 of such members as the Administrator deems appropriate to
5 advise him on franchising and franchise related matters. The
6 members shall be persons who have knowledge and experience in
7 franchising. The members of the Franchise Advisory Board
8 shall serve at the pleasure of the Administrator. The
9 Franchise Advisory Board from time to time shall make
10 recommendations concerning the administration and enforcement
11 of this Act. Members of the Franchise Advisory Board shall
12 serve without compensation but shall be reimbursed for actual
13 and necessary expenses incurred in their official capacities.
14 The Board shall select its own chairman, establish rules and
15 procedures, and keep a record of matters transpiring at all
16 meetings.
17 Section 1-20. Definitions. As used in this Act and
18 except as otherwise provided in Article III:
19 (1) "Franchise" means a contract or agreement, either
20 expressed or implied, whether oral or written, between two or
21 more persons by which:
22 (a) a franchisee is granted the right to engage in
23 the business of offering, selling, or distributing goods
24 or services, under a marketing plan or system prescribed
25 or suggested in substantial part by a franchisor; and
26 (b) the operation of the franchisee's business
27 pursuant to such plan or system is substantially
28 associated with the franchisor's trademark, service mark,
29 trade name, logotype, advertising, or other commercial
30 symbol designating the franchisor or its affiliate; and
31 (c) the person granted the right to engage in such
32 business is required to pay, directly or indirectly, a
33 franchise fee of $500 or more;
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1 Provided that this Act shall not apply to any of the
2 following persons, entities or relationships which may
3 involve or acquire a franchise or any interest in a
4 franchise:
5 (i) any franchised business which is operated
6 by the franchisee on the premises of the franchisor
7 or subfranchisor as long as such franchised business
8 is incidental to the business conducted by the
9 franchisor or subfranchisor at such premises,
10 including, without limitation, leased departments
11 and concessions; or
12 (ii) a fractional franchise. A "fractional
13 franchise" means any relationship in which the
14 person described therein as a franchisee, or any of
15 the current directors or executive officers thereof,
16 has been in the type of business represented by the
17 franchise relationship for more than 2 years and the
18 parties anticipated, or should have anticipated, at
19 the time the agreement establishing the franchise
20 relationship was reached, that the sales arising
21 from the relationship would represent no more than
22 20% of the sales in dollar volume of the franchisee
23 for a period of at least one year after the
24 franchisee begins selling the goods or services
25 involved in the franchise; or
26 (iii) a franchise agreement for the use of a
27 trademark, service mark, trade name, logotype,
28 advertising, or other commercial symbol designating
29 a person who offers on a general basis, for a fee or
30 otherwise, a bona fide service for the evaluation,
31 testing, or certification of goods, commodities, or
32 services.
33 (2) "Franchisee" means a person to whom a franchise is
34 granted and includes, unless stated otherwise in this Act:
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1 (a) a subfranchisor with regard to its relationship with a
2 franchisor and (b) a subfranchisee with regard to its
3 relationship with a subfranchisor.
4 (3) "Franchisor" means a person who grants a franchise
5 and includes a subfranchisor with regard to its relationship
6 with a franchisee, unless stated otherwise in this Act.
7 (4) "Subfranchise" means any contract or agreement
8 between a franchisor and a subfranchisor whereby the
9 subfranchisor is granted the right, in consideration of the
10 payment of a franchise fee in whole or in part for such
11 right, to service franchises or to sell or negotiate the sale
12 of franchises. Where used in this Act, unless specifically
13 stated otherwise, "franchise" includes "subfranchise."
14 (5) "Subfranchisor" means a person to whom the right to
15 sell subfranchises is granted.
16 (6) "Order" means a consent, authorization, approval,
17 prohibition, or requirement applicable to a specific case
18 issued by the Attorney General Administrator.
19 (7) "Person" means an individual, a corporation, a
20 partnership, a joint venture, an association, a joint stock
21 company, a trust, or an unincorporated organization.
22 (8) "Rule" means any published regulation or standard of
23 general application issued by the Administrator.
24 (9) "Sale" or "sell" includes every contract or
25 agreement of sale of, contract to sell, or disposition of, a
26 franchise or interest in a franchise for value.
27 (10) "State" means the State of Illinois.
28 (11) "Fraud" and "deceit" are not limited to common law
29 fraud or deceit.
30 (12) "Offer" or "offer to sell" includes every attempt
31 to offer to dispose of, or solicitation of an offer to buy, a
32 franchise, any interest in a franchise or an option to
33 acquire a franchise for value.
34 (13) "Publish" means publicly to issue or circulate by
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1 newspaper, mail, radio, or television, or otherwise to
2 disseminate to the public.
3 (14) "Franchise fee" means any fee or charge that a
4 franchisee is required to pay directly or indirectly for the
5 right to enter into a business or sell, resell, or distribute
6 goods, services or franchises under an agreement, including,
7 but not limited to, any such payment for goods or services,
8 provided that the Administrator may by rule define what
9 constitutes an indirect franchise fee, and provided further
10 that the following shall not be considered the payment of a
11 franchise fee: (a) the payment of a reasonable service charge
12 to the issuer of a credit card by an establishment accepting
13 or honoring such credit card; (b) amounts paid to a trading
14 stamp company by a person issuing trading stamps in
15 connection with the retail sale of merchandise or services;
16 (c) the purchase or agreement to purchase goods for which
17 there is an established market at a bona fide wholesale
18 price; (d) the payment for fixtures necessary to operate the
19 business; (e) the payment of rent which reflects payment for
20 the economic value of the property; or (f) the purchase or
21 agreement to purchase goods for which there is an established
22 market at a bona fide retail price subject to a bona fide
23 commission or compensation plan. The Administrator may by
24 rule define what shall constitute an established market.
25 (15) "Disclosure statement" means the document provided
26 for in Section 2-50 of this Act and all amendments to such
27 document.
28 (16) "Write" or "written" shall include printed,
29 lithographed or any other means of graphic communication.
30 (17) (Blank).
31 (18) "Marketing plan or system" means a plan or system
32 relating to some aspect of the conduct of a party to a
33 contract in conducting business, including but not limited to
34 (a) specification of price, or special pricing systems or
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1 discount plans, (b) use of particular sales or display
2 equipment or merchandising devices, (c) use of specific sales
3 techniques, (d) use of advertising or promotional materials
4 or cooperation in advertising efforts; provided that an
5 agreement is not a marketing plan or system solely because a
6 manufacturer or distributor of goods reserves the right to
7 occasionally require sale at a special reduced price which is
8 advertised on the container or packaging material in which
9 the product is regularly sold, if the reduced price is
10 absorbed by the manufacturer or distributor.
11 (19) "Administrator" means the Illinois Attorney
12 General.
13 (20) (a) An offer to sell a franchise is made in this
14 State when the offer either originates from this State or
15 is directed by the offeror to this State and received at
16 the place to which it is directed. An offer to sell is
17 accepted in this State when acceptance is communicated to
18 the offeror in this State; and acceptance is communicated
19 to the offeror in this State when the offeree directs it
20 to the offeror in this State reasonably believing the
21 offeror to be in this State and it is received at the
22 place to which it is directed.
23 (b) An offer to sell a franchise is not made in
24 this State merely because the franchisor circulates or
25 there is circulated in this State an advertisement in (i)
26 a bona fide newspaper or other publication of general,
27 regular and paid circulation which has had more than 2/3
28 of its circulation outside this State during the past 12
29 months, or (ii) a radio or television program originating
30 outside this State which is received in this State.
31 (21) "Franchise broker" means any person engaged in the
32 business of representing a franchisor in offering for sale or
33 selling a franchise and is not a franchisor or an officer,
34 director or employee of a franchisor with respect to such
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1 franchise. A franchisee shall not be a franchise broker
2 merely because it receives a payment from the franchisor in
3 consideration of the referral of a prospective franchisee to
4 the franchisor, if the franchisee does not otherwise
5 participate in the sale of a franchise to the prospective
6 franchisee. A franchisee shall not be deemed to participate
7 in a sale merely because he responds to an inquiry from a
8 prospective franchisee.
9 (22) "Salesperson" means any person employed by or
10 representing a franchise broker in effecting or attempting to
11 effect the offer or sale of a franchise.
12 ARTICLE II
13 FRANCHISE DISCLOSURE
14 Section 2-5. Sale by franchisee and extension or renewal
15 of existing franchise. There shall be exempted from the
16 provisions of Sections 2-20, 2-25, 2-35, 2-45, and 4-10 of
17 this Act the offer or sale of a franchise by a franchisee for
18 its own account if the sale is not effected by or through a
19 franchisor. A sale is not effected by or through a
20 franchisor merely because a franchisor has a right to approve
21 or disapprove a different franchisee or requires payment of a
22 reasonable transfer fee.
23 There shall be exempted from the provisions of Sections
24 2-20, 2-25, 2-35, 2-45, and 4-10 of this Act the extension or
25 renewal of an existing franchise or the exchange or
26 substitution of a modified or amended franchise agreement
27 where there is no interruption in the operation of the
28 franchise business by the franchisee.
29 Section 2-10. Exemptions. There shall be exempted from
30 the provisions of Sections 2-20, 2-25, 2-35, 2-45, and 4-10
31 of this Act the offer and sale of a franchise if the
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1 prospective franchisee qualifies as one of the following:
2 any bank as defined in Section 3(a)(2) of the
3 Securities Act of 1933 whether acting in its individual or
4 fiduciary capacity or as an insurance company as defined in
5 Section 2(13) of that Act.
6 Section 2-15. Exemptions from disclosure statement and
7 registration requirements granted by Administrator. The
8 Administrator may by rule or order provide that any
9 information required by Section 2-50 of this Act to be
10 included in the disclosure statement need not be included in
11 respect of any class of franchises if he finds that the
12 requirement of such information is inapplicable to such class
13 and that disclosure fully adequate for the protection of
14 prospective franchisees is otherwise required to be included
15 within the disclosure statement. The Administrator may by
16 rule or order, and subject to such terms and conditions as he
17 may prescribe, exempt any franchise, franchisor,
18 subfranchisor, or franchise broker from Sections 2-20, 2-25,
19 2-35, and 4-10 of this Act if he finds that the enforcement
20 of this Act is not necessary (1) in the public interest, or
21 (2) for the protection of any class of prospective
22 franchisees, or (3) by reason of the investment involved, or
23 (4) because of the limited character of the offering. The
24 disclosure statement required by Section 2-50 need not be
25 furnished to a franchisee who has already been furnished with
26 a copy of such disclosure statement in connection with a
27 prior purchase of a franchise by such franchisee, provided
28 that no material amendments have been made to such disclosure
29 statement since it was furnished to such franchisee.
30 Section 2-20. Registration and Annual Report. No
31 franchisor may sell or offer to sell a franchise in this
32 State if (1) the franchisee is domiciled in this State or (2)
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1 the offer of the franchise is made or accepted in this State
2 and the franchise business is or will be located in this
3 State, unless the franchisor has registered the franchise
4 with the Administrator by filing such form of notification
5 and disclosure statement as required under Section 2-50.
6 The registration of a franchise shall become effective on
7 the 21st day after the date of the filing of the required
8 materials, unless the Administrator has denied registration
9 under subdivision (3) of Section 4-20.
10 Annually, but not later than one business day before the
11 anniversary date of the registration, the franchisor shall
12 file the disclosure statement updated as of a date within 120
13 days of the anniversary date of the registration.
14 Section 2-25. Amendments. Within 90 days of the
15 occurrence of any material change in any facts required to be
16 disclosed, a franchisor whose franchise is registered under
17 this Act shall amend its disclosure statement and shall
18 deliver the amended disclosure statement in accordance with
19 the requirements of subsection (2) of Section 2-50 and
20 Section 4-10 of this Act to any prospective franchisee,
21 including prospective franchisees to whom a disclosure
22 statement was previously delivered if the material change
23 relates to or affects the franchisor or the franchise offered
24 to such prospective franchisees. The amended disclosure
25 statement shall be filed with the Administrator. An amendment
26 shall not be required if the terms of the franchise agreement
27 merely reflect changes from the franchisor's registered
28 franchise made pursuant to negotiations between the
29 franchisee and the franchisor.
30 The fact that the franchise is considered to be
31 registered is not a finding that the amended disclosure
32 statement complies with the standard of disclosure required
33 by this Act.
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1 Section 2-30. Period of effectiveness. The registration
2 of a franchise and the disclosure statement used in
3 connection therewith shall continue to be effective unless
4 the Administrator issues an order suspending, terminating,
5 prohibiting or denying the sale or registration of the
6 franchise under this Act.
7 Section 2-35. Registration of franchise brokers. A
8 franchise broker shall not offer or sell a franchise which is
9 required to be registered under this Act unless the franchise
10 broker first registers under this Act by filing an
11 application in a form prescribed by the Administrator and a
12 consent to service of process, if required, and shall file
13 with the Administrator, for each salesperson who represents
14 the franchise broker in the offer or sale of franchises which
15 are required to be registered under this Act such information
16 as the Administrator may by rule require. The Administrator
17 may prescribe rules governing the sale of a franchise by a
18 franchise broker including qualifications, conduct,
19 suspension, termination, prohibition or denial of the
20 registration of a franchise broker. The registration of a
21 franchise broker shall be effective for a period of one year
22 from the registration date, and may be renewed for periods of
23 one year, unless the Administrator by rule or order
24 prescribes a different period.
25 Section 2-40. Effect of registration. The fact that a
26 franchise has been registered by the Administrator is not a
27 finding by the Administrator that the disclosure statement
28 filed with the Administrator in connection with that
29 registration is in any way true, accurate or complete in
30 substance or on its face, or to be held to mean that the
31 Administrator has in any way passed upon the merits or given
32 approval to such franchise. It is unlawful to make, or cause
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1 to be made, to any prospective franchisee any express or
2 implied representation contrary to the foregoing or to
3 advertise or represent that the Administrator approves of or
4 recommends any franchise.
5 Section 2-45. Escrow of franchise fees; surety bonds.
6 If the Administrator finds that a franchisor has failed to
7 demonstrate that adequate financial arrangements have been
8 made to fulfill obligations to provide real estate,
9 improvements, equipment, inventory, training, or other items
10 to be included in the establishment and opening of the
11 franchise business being offered, the Administrator may by
12 rule or order require the escrow or impoundment of franchise
13 fees and other funds paid by the franchisee until such
14 obligations have been fulfilled, or, at the option of the
15 franchisor, the furnishing of a surety bond as provided by
16 rule of the Administrator, if he finds that such requirement
17 is necessary and appropriate to protect prospective
18 franchisees.
19 Section 2-50. Form and contents of disclosure
20 statements. The disclosure statement required under this Act
21 shall be prepared in accordance with the Uniform Franchise
22 Offering Circular Guidelines as adopted and amended by the
23 North American Securities Administrators Association,
24 Incorporated.
25 All statements in the disclosure statement shall be free
26 from any false or misleading statement of a material fact,
27 shall not omit to state any material fact required to be
28 stated or necessary to make the statements not misleading,
29 and shall be accurate and complete as of the effective date
30 thereof.
31 ARTICLE III
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1 TERMINATIONS
2 Section 3-5. Definitions. As used in this Article III:
3 "Affected party" means a party to a franchise or
4 distributorship agreement which the other party seeks to
5 cancel, not renew, otherwise terminate, or alter.
6 "Affiliate" means a person controlling, controlled by, or
7 under common control with another person.
8 "Business day" means a day other than a Saturday, Sunday,
9 or legal holiday under the laws of this State.
10 "Distributorship" means a written agreement between 2 or
11 more persons by which:
12 (i) a distributor is granted the right to engage in
13 the business of offering, selling, or distributing goods
14 or services under a marketing plan prescribed in
15 substantial part by a supplier, or the supplier transmits
16 to the distributor the essential ingredients or formula
17 to make a particular product; and
18 (ii) operation of the distributor's business
19 pursuant to the marketing plan is substantially
20 associated with a trademark, service mark, trade name,
21 advertising, or other commercial symbol designating,
22 owned by, or licensed by the supplier or its affiliate.
23 "Distributorship agreement" means any written contract,
24 agreement, or arrangement for a definite or indefinite period
25 between a supplier, other than (i) an Illinois winery or (ii)
26 a winery that has annual case sales in the State of Illinois
27 less than or equal to 10,000 cases per year, and a
28 distributor pursuant to which a distributor has been granted
29 a distributorship.
30 "Franchise" means:
31 (i) a written agreement between 2 or more persons
32 by which:
33 (A) a franchisee is granted the right to
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1 engage in the business of offering, selling, or
2 distributing goods or services under a marketing
3 plan prescribed in substantial part by the
4 franchisor;
5 (B) operation of the franchisee's business
6 pursuant to the marketing plan is substantially
7 associated with a trademark, service mark, trade
8 name, advertising, or other commercial symbol
9 designating, owned by, or licensed by the franchisor
10 or its affiliate; and
11 (C) the franchisee pays, agrees to pay, or is
12 required to pay, directly or indirectly, a franchise
13 fee; or
14 (ii) a master franchise.
15 "Franchise fee" means a fee or charge for the right to
16 enter into or maintain a business under a franchise,
17 including a payment or deposit for goods, services, rights,
18 or training, but not including:
19 (i) payment for a reasonable quantity of inventory
20 goods at a bona fide wholesale price;
21 (ii) payment at fair market value for purchase or
22 lease of real property, fixtures, equipment, or supplies
23 necessary to enter into or to maintain a business;
24 (iii) payment for goods on consignment, if the
25 proceeds remitted by the consignee from sale of the goods
26 constitute only the bona fide wholesale price of the
27 goods;
28 (iv) payment of a reasonable service charge or
29 discount to the issuer of a credit card by a person
30 honoring the credit card or to a trading stamp company by
31 a person issuing trading stamps;
32 (v) payment of a commission or compensation in a
33 transaction constituting in substance only a bona fide
34 wholesale transaction;
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1 (vi) repayment of a bona fide loan;
2 (vii) payment of a bona fide security deposit for
3 real or personal property; or
4 (viii) payment of a bona fide rental or cooperative
5 advertising charge by a tenant in a shopping center to
6 the shopping center or to a person designated by the
7 operator of the shopping center.
8 "Good cause" means a failure by a distributor or
9 franchisee to comply with essential and reasonable
10 requirements imposed upon the distributor or franchisee by
11 the supplier or franchisor. The requirements may not,
12 without good cause, be discriminating either by their terms
13 or in the methods or effects of enforcement as compared with
14 requirements imposed on other similarly situated distributors
15 or franchisees within Illinois by the supplier or franchisor.
16 The requirements may not be inconsistent with this Act or in
17 violation of any law or regulation.
18 "Master franchise" means an agreement in which a
19 franchisor, for consideration given for the right, grants a
20 subfranchisor a right to offer or sell franchises for the
21 subfranchisor's account. A franchise is not a master
22 franchise solely because the franchise grants a person a
23 right to receive compensation for making referrals to a
24 franchisor or subfranchisor. A relationship between a
25 franchisor and a broker, agent, or sales representative who
26 does not have an ongoing relationship with franchisees of the
27 franchisor is not a master franchise unless the broker,
28 agent, or sales representative gives consideration to the
29 franchisor or its affiliate in exchange for a right to offer
30 franchises.
31 "Offer" or "offer to sell" means an offer of a
32 distributorship, or an offer or attempt to offer or to
33 dispose of, or a solicitation of an offer to obtain, an
34 interest in a franchise, but does not include (i)
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1 renegotiation or other conduct in anticipation of renewal,
2 replacement, or extension of an existing franchise or
3 distributorship, whether or not the existing agreement is to
4 be modified or replaced, or (ii) an offer to acquire an
5 interest in a franchise.
6 "Person" means an individual, corporation, business
7 trust, estate, trust, partnership, joint venture,
8 association, government, governmental subdivision or agency,
9 any other legal or commercial entity, joint stock company,
10 unincorporated organization, or the Administrator.
11 "Sell" means to dispose, or to agree to dispose, of an
12 interest in a franchise, but does not include renegotiation
13 or other conduct in anticipation of renewal, replacement, or
14 extension of an existing franchise, whether or not the
15 existing agreement is to be modified or replaced.
16 "Subfranchisor" means a person who acquires a master
17 franchise.
18 "Supplier" means a person who grants the right to a
19 distributor, in writing:
20 (i) to engage in the business of offering, selling,
21 or distributing goods or services under a marketing plan
22 prescribed in substantial part by the supplier or who
23 transmits to the distributor the essential ingredients or
24 formula to make a particular product; and
25 (ii) to operate the distributor's business pursuant
26 to the marketing plan that is substantially associated
27 with a trademark, service mark, trade name, advertising,
28 or other commercial symbol designating, owned by, or
29 licensed by the supplier or its affiliate.
30 Section 3-6. Written evidence of agreements. All
31 distributorship and franchise agreements shall be evidenced
32 by a writing setting forth the essential duties and
33 responsibilities of the contracting parties.
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1 Section 3-10. Territorial applicability.
2 (a) This Act applies to a franchise or distributorship
3 that is offered or sold in this State after the effective
4 date of this Act. Articles II and IV of this Act also apply
5 to a franchise and, where indicated in those Articles, to a
6 distributorship that is operated in this State by the
7 franchisee, purchaser, or distributor if it is renewed by
8 agreement of the parties to the relationship after the
9 effective date of this Act or if one party seeks to cancel,
10 not renew, otherwise terminate, or alter the franchise or
11 distributorship.
12 (b) A franchise or distributorship is offered or sold in
13 this State if an offer to sell is made or accepted in this
14 State or an offer to buy is accepted in this State, or if a
15 franchise or distributorship located in this State is sought
16 to be cancelled, not renewed, otherwise terminated or altered
17 after the effective date of this Act.
18 (c) An offer to sell is made in this State if the offer
19 is directed by the offeror into this State from within or
20 from outside this State and is received where it is directed.
21 An offer to sell is accepted in this State if the offeree
22 communicates acceptance to the offeror in this State and
23 acceptance is received where it is directed.
24 (d) This Act also applies to a franchise or
25 distributorship offered or sold outside this State if it is
26 offered or sold to a resident of this State and is to be
27 conducted in this State.
28 (e) An offer to sell is not made in this State solely
29 because the offer appears in a newspaper or other publication
30 of general and regular circulation if the publication has had
31 more than two-thirds of its circulation outside this State
32 during the 12 months before the offer is published or the
33 offer appears in a broadcast or transmission originating
34 outside this State.
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1 Section 3-15. Waiver void. A party to a franchise or
2 distributorship may not waive a right or benefit conferred or
3 avoid a duty imposed by this Act or by a rule or order under
4 this Act except to settle a bona fide dispute or claim
5 asserted under this Act. A settlement of an actual or
6 potential dispute or claim may include a general release.
7 Section 3-17. Discrimination. It shall be an unfair
8 franchise or distributorship practice and a violation of this
9 Act for any franchisor or supplier to unreasonably and
10 materially discriminate between franchisees operating a
11 franchised business located in this State or distributors
12 operating a distributorship located in this State in the
13 charges offered or made for franchise fees, distributorship
14 fees, royalties, goods, services, equipment, rentals, or
15 advertising services, if such discrimination will cause
16 competitive harm to a franchisee or distributor who competes
17 with a franchisee or supplier that received the benefit of
18 the discrimination, unless and to the extent that any
19 classification of or discrimination between franchisees or
20 distributors is:
21 (a) based on franchises or distributorships granted at
22 different times, and such discrimination is reasonably
23 related to such differences in time;
24 (b) related to one or more programs for making
25 franchises or distributorships available to persons with
26 insufficient capital, training, business experience or
27 education, or lacking other qualifications;
28 (c) related to local or regional experimentation with or
29 variations in product or service lines or business formats or
30 designs;
31 (d) related to efforts by one or more franchisees or
32 distributors to cure deficiencies in the operation of
33 franchise or distributorship businesses or defaults in
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1 franchise or distributorship agreements; or
2 (e) based on other reasonable distinctions considering
3 the purposes of this Act and is not arbitrary.
4 Section 3-35. Application and construction. This Act
5 shall be applied and construed to effectuate its general
6 purpose to make uniform the law with respect to the subject
7 of this Act among states enacting it. This Act shall be
8 liberally construed to effectuate its purposes.
9 Section 3-40. Severability. The provisions of this Act
10 are severable under Section 1.31 of the Statute on Statutes.
11 Section 3-45. Duty of good faith. A franchise or
12 distributorship imposes on the parties a duty of good faith
13 in its performance, enforcement, cancellation, non-renewal,
14 other termination, or alteration. "Good faith" means honesty
15 in fact and the observance of reasonable commercial standards
16 of fair dealing in the trade.
17 Section 3-50. Right of free association. A party to a
18 franchise or distributorship has a right to form or join a
19 trade or other lawful association whose purposes are related
20 to the business of the franchise or distributorship.
21 Section 3-55. Cancellation and alteration of franchises
22 or distributorships.
23 (a) No supplier, distributor, franchisor, or franchisee
24 may cancel, fail to renew, otherwise terminate, or alter a
25 distributorship agreement or franchise unless the party
26 intending that action has good cause for the cancellation,
27 failure to renew, termination, or alteration, the party
28 intending that action has made good faith efforts to resolve
29 disagreements, and, in any case in which prior notification
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1 is required under Section 3-60, the party intending to act
2 has furnished the prior notification and the affected party
3 has not eliminated the reasons specified in the notification
4 for cancellation, failure to renew, or termination within 90
5 days after the sending of the notification.
6 (b) No supplier or franchisor may, without good cause,
7 fail to renew a distributorship agreement or franchise on
8 terms then equally available to all of its distributors or
9 franchisees in Illinois or alter the terms of a
10 distributorship agreement or franchise from those terms then
11 equally available to all of its distributors or franchisees
12 in Illinois.
13 (c) No supplier or franchisor shall present to a
14 distributor or franchisee a distributorship agreement or
15 franchise that attempts to waive compliance with any
16 provision of this Act or that requires the distributor or
17 franchisee to waive compliance with any provision of this
18 Act.
19 (d) No distributor or franchisee shall present to a
20 supplier or franchisor a distributorship agreement or
21 franchise that attempts to waive compliance with any
22 provision of this Act or that requires the distributor or
23 franchisee to waive compliance with any provision of this
24 Act.
25 Section 3-60. Termination and notice of cancellation.
26 (a) Except as provided in subsection (c) of this
27 Section, no supplier, distributor, franchisee, or franchisor
28 may cancel, fail to renew, otherwise terminate, or alter a
29 distributorship agreement or franchise unless the supplier,
30 distributor, franchisor, or franchisee furnishes prior
31 notification to the affected party in accordance with
32 subsection (b).
33 (b) The notification required under subsection (a) shall
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1 be in writing and sent to the affected party by certified
2 mail not less than 90 days before the date on which the
3 distributorship agreement or franchise will be cancelled, not
4 renewed, otherwise terminated, or altered. The notification
5 shall contain (i) a statement of intention to cancel, fail to
6 renew, otherwise terminate, or alter a distributorship
7 agreement or franchise, (ii) a complete statement of reasons
8 therefore, including all data and documentation necessary to
9 fully apprise the affected party of the reasons for the
10 action, and (iii) the date on which the action shall take
11 effect.
12 (c) A supplier or franchisor may cancel, fail to renew,
13 otherwise terminate, or alter a distributorship agreement or
14 franchise without furnishing any prior notification for any
15 of the following reasons:
16 (1) Failure of one affected party to pay any
17 account when due and upon demand for such payment, in
18 accordance with agreed payment terms.
19 (2) Assignment by the affected party for the
20 benefit of creditors, or similar disposition, of
21 substantially all of the assets of such party's business.
22 (3) Insolvency of the affected party or the
23 institution of proceedings in bankruptcy by or against
24 the affected party.
25 (4) Dissolution or liquidation of the affected
26 party.
27 (5) The affected party's conviction of, or plea of
28 guilty or no contest to, a charge of violating a law or
29 regulation in this State that materially and adversely
30 affects the ability of either party to continue to do
31 business under the franchise or distributorship
32 agreement, or, if applicable, the revocation or
33 suspension of a license or permit necessary to do
34 business under the franchise or distributorship agreement
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1 in this State.
2 (6) Any attempted transfer of business assets of
3 the affected party, voting stock of the affected party,
4 or voting stock of any parent corporation of the affected
5 party, or any change in the beneficial ownership or
6 control of any entity, without obtaining the affected
7 party's prior consent or approval, unless the party
8 seeking to terminate, not renew, cancel, or alter the
9 franchise or distributorship agreement neither approves,
10 consents to, nor objects to the transfer within 60 days
11 after receiving all requested information from the
12 affected party regarding the proposed purchase, in which
13 event the consent to the proposed transaction shall be
14 deemed to have been given.
15 (7) Fraudulent conduct by the affected party in its
16 dealings with the other party to the franchise or
17 distributorship agreement.
18 Section 3-75. Rulemaking. With respect to franchises,
19 the Administrator may promulgate in accordance with the
20 Illinois Administrative Procedure Act rules necessary to
21 implement this Act. In order to enhance uniformity among the
22 states, the Administrator shall take into account the rules
23 of other states on the same subject.
24 Section 3-80. Records. A person who offers, sells, or
25 provides a franchise shall maintain records of sales and
26 offers directed to specific persons made in this State and
27 keep them for 4 years after the date of the offer or sale.
28 The records must contain the signed acknowledgment of receipt
29 for each disclosure document delivered to a prospective
30 purchaser under this Act. Those records must be made
31 available to the Administrator at the office of the
32 Administrator on demand of the Administrator. Records
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1 required by this Section may be kept on photographic or
2 electronic media but must be printed out if the Administrator
3 requests.
4 Section 3-85. Access to information. Franchise
5 documents filed with the Administrator under this Act are
6 documents of public record.
7 ARTICLE IV
8 ADMINISTRATION AND ENFORCEMENT
9 Section 4-10. Prohibited practices.
10 (1) Sale of unregistered franchise unlawful. It is
11 unlawful for any person to offer or sell any franchise
12 required to be registered under this Act unless the franchise
13 has been registered under this Act or is exempt under this
14 Act.
15 (2) Failure to deliver a disclosure statement unlawful.
16 It is unlawful for any person to offer or sell any franchise
17 which is required to be registered under this Act without
18 first providing to the prospective franchisee at least 14
19 days prior to the execution by the prospective franchisee of
20 any binding franchise or other agreement, or at least 14
21 business days prior to the receipt by such person of any
22 consideration, whichever occurs first, a copy of a disclosure
23 statement meeting the requirements of this Act and registered
24 by the Administrator, together with a copy of all proposed
25 agreements relating to the sale of the franchise. For the
26 purposes of this Act, delivery of a disclosure statement to a
27 general partner of a partnership shall constitute delivery to
28 the partnership and its partners and delivery of a disclosure
29 statement to a principal officer of a corporation shall
30 constitute delivery to the corporation and its shareholders.
31 (3) Sale of franchise by unregistered franchise broker
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1 unlawful. It is unlawful for any franchise required to be
2 registered under this Act to be offered for sale or sold in
3 this State by a franchise broker subject to this Act who is
4 not first registered under this Act unless exempt from
5 registration.
6 (4) Filing of untrue report unlawful. It is unlawful for
7 any person to make or cause to be made any untrue statement
8 of a material fact in any application, notice, or report
9 filed with the Administrator, or to omit to state in any
10 application, notice, or report any material fact, or to fail
11 to notify the Administrator of any material change in such
12 application, notice, or report, as required by this Act.
13 Section 4-15. Fraudulent practices. In connection with
14 the offer of a distributorship or an offer or sale of any
15 franchise made in this State, it is unlawful for any person,
16 directly or indirectly, to:
17 (a) employ any device, scheme, or artifice to defraud;
18 (b) make any untrue statement of a material fact or omit
19 to state a material fact necessary in order to make the
20 statements made, in the light of the circumstances under
21 which they are made, not misleading; or
22 (c) engage in any act, practice, or course of business
23 which operates or would operate as a fraud or deceit upon any
24 person.
25 For the purposes of this Section, an offer of a
26 distributorship or an offer or sale of a franchise is made in
27 this State when: (i) an offer of a distributorship or an
28 offer to sell or buy a franchise is made in this State and
29 accepted within or outside of this State, or (ii) an offer of
30 a distributorship or an offer to sell or buy a franchise is
31 made outside of this State and accepted in this State, or
32 (iii) the offeree is domiciled in this State, or (iv) the
33 franchised business or distributorship is or will be located
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1 in this State.
2 Section 4-20. Enforcement. The Administrator may
3 suspend, terminate, prohibit or deny the sale of any
4 franchise or registration of any franchise, or franchise
5 broker or salesperson if it appears to him that: (1) there
6 has been a failure to comply with any of the provisions of
7 this Act or the rules or orders of the Administrator
8 pertaining thereto; or (2) that the disclosure statement or
9 any amendment thereto includes any false or misleading
10 statement of a material fact or omits to state any material
11 fact required to be stated therein or necessary to make the
12 statements therein not misleading; or (3) that the disclosure
13 statement filed in conjunction with an initial registration
14 under Section 2-20 is materially deficient. A disclosure
15 statement is "materially deficient" if it fails to comply
16 with the requirements of the Uniform Franchise Offering
17 Circular Guidelines referred to in Section 2-50; or (4) that
18 the sale of the franchise would constitute a
19 misrepresentation, deceit or fraud upon prospective
20 franchisees; or (5) that any person in this State is engaging
21 in or about to engage in false, fraudulent or deceptive
22 practices or any device, scheme, or artifice to defraud in
23 connection with the offer or sale of the franchise; or (6)
24 that any person identified in the disclosure statement or any
25 person engaged in the offer or sale of the franchise in this
26 State has been convicted of an offense, is subject to an
27 order or civil judgment or is a defendant in a proceeding
28 required to be described in the disclosure statement and the
29 involvement of such person creates an unreasonable risk to
30 prospective franchisees; or (7) (blank); or (8) (blank); or
31 (9) that the franchisor's enterprise or method of business
32 includes or would include activities which are illegal where
33 performed; or (10) (blank); or (11) (blank).
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1 In no case shall the Administrator, or any person
2 designated by him, in the administration of this Act, incur
3 any official or personal liability by issuing an order or
4 other proceeding or by suspending, denying, prohibiting or
5 terminating the registration of a franchise broker or
6 salesperson, or by denying, suspending, terminating or
7 prohibiting the registration of franchises, or prohibiting
8 the sale of franchises, or by suspending or prohibiting any
9 person from acting as a franchise broker or salesperson.
10 The Administrator may exercise any of the powers
11 specified in Section 5-80 of this Act.
12 Section 4-25. Hearings and notice of order suspending,
13 terminating, prohibiting or denying sales or registration.
14 The Administrator may summarily issue an order prohibiting,
15 suspending, terminating or denying the sale of a franchise or
16 registration of a franchise or franchise broker if such order
17 is within the public interest and Section 4-20 of this Act,
18 provided the Administrator shall promptly notify the person
19 or entity affected, in writing, of the entry of an order
20 under this Act and of the reasons therefor. Upon receipt of a
21 written request from such person or entity, the matter will
22 be set down for hearing to commence within 10 days after such
23 receipt unless the franchisor, or franchise broker consents
24 to a later date. If a hearing is not requested within 15 days
25 from the date of the order and none is ordered by the
26 Administrator, the order will remain in effect until it is
27 modified or vacated by the Administrator. If a hearing is
28 requested or ordered, the Administrator, after notice and
29 hearing, may modify or vacate the order or extend it until
30 its final determination.
31 Section 4-65. Rules and interpretive opinions. The
32 Administrator may make and enforce such reasonable rules as
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1 are necessary to administer and enforce this Act. Such rules
2 and regulations shall conform to and comply with "The
3 Illinois Administrative Procedure Act", approved September
4 22, 1975, as amended. The Administrator may in his discretion
5 honor requests for interpretive opinions. The Administrator
6 shall maintain a complete collection of his interpretive
7 opinions which is properly indexed, a copy of which shall be
8 made available to any person upon request and payment of a
9 reasonable fee to be determined by the Administrator.
10 Section 4-85. Books and records. Every franchisor
11 selling franchises in this State shall at all times keep and
12 maintain a complete set of books, records and accounts of
13 such sales.
14 Section 4-90. Public inspection.
15 (a) Generally. All disclosure statements and other
16 papers and documents received by the Administrator under this
17 Act shall be open to public inspection, except that the
18 Administrator may, in his discretion, withhold from public
19 inspection any information the disclosure of which is, in the
20 judgment of the Administrator, not necessary in the public
21 interest or for the protection of franchisees. The
22 Administrator may publish any information filed with him or
23 obtained by him, if in the judgment of the Administrator,
24 such action is in the public interest. No provision of this
25 Act authorizes the Administrator or any of his assistants,
26 clerks or deputies to disclose any information withheld from
27 public inspection except among themselves or when necessary
28 or appropriate in a proceeding or investigation under this
29 Act or to other federal or State regulatory agencies. No
30 provision of this Act either creates or derogates from any
31 privilege which exists at common law or otherwise when
32 documentary or other evidence is sought under a subpoena
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1 directed to the Administrator or any of his assistants,
2 clerks or deputies.
3 (b) Restrictions on use. The Administrator and his
4 employees may not use for personal benefit any information
5 which is obtained by them under this Act and which is not
6 then generally available to the public.
7 Section 4-95. Copies to be furnished. On request and at
8 such reasonable charges as he prescribes by rule, the
9 Administrator shall furnish to any person photostatic or
10 other copies, certified under his seal of office if
11 requested, of any document which is retained as a matter of
12 public record. He shall not charge or collect any fee for
13 copies of any document furnished to public officers for use
14 in their official capacity. In any judicial proceeding or
15 prosecution, any copy so certified is prima facie evidence of
16 the contents of the document certified.
17 Section 4-100. Destruction of records.
18 (a) Period of retention. The Administrator may destroy
19 any disclosure statements or orders, together with the files
20 and folders, as useless or obsolete, 4 years after the date
21 of receipt or issuance. A permanent record shall be
22 maintained of any civil or criminal enforcement of this Act
23 by the Administrator.
24 (b) Microfilm. Copies on microfilm or in other form
25 which may be retained by the Administrator in his discretion
26 of any records destroyed under authority of this Section
27 shall be accepted for all purposes as equivalent to the
28 original when certified by the Administrator.
29 Section 4-105. Fees.
30 (a) The Administrator shall charge and collect the fees
31 fixed by this Section. All fees and charges collected under
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1 this Section shall be transmitted to the State Treasurer at
2 least weekly, accompanied by a detailed statement thereof.
3 Such fees and charges shall be refundable at the discretion
4 of the Administrator.
5 (b) The fee for the initial registration of a franchise
6 shall be $500.
7 (c) The fee for filing an amended disclosure statement
8 shall be $100 if the amendment pertains to a material change,
9 otherwise $25.
10 (d) The fee for an interpretive opinion shall be $50.
11 (e) The fee for registration of a franchise broker shall
12 be $100 with a renewal fee of $100.
13 (f) The fee for filing an annual report shall be $100.
14 Section 4-115. Construction. This Act shall be
15 liberally construed to effect the purposes thereof.
16 Section 4-120. This Act shall not be construed to repeal
17 any right, claim, penalty, offense or punishment existing
18 under the Franchise Disclosure Act prior to the date this Act
19 takes effect. This Act shall apply only to actions relating
20 to franchises and distributorships undertaken on and
21 subsequent to the date this Act takes effect as well as to
22 all resulting rights, claims, penalties, offenses and
23 punishment.
24 ARTICLE V
25 ENFORCEMENT; DISPUTE RESOLUTION
26 Section 5-5. Waivers void. Any condition, stipulation,
27 or provision purporting to bind any person acquiring any
28 franchise to waive compliance with any provision of this Act
29 or any other law of this State is void. This Section shall
30 not prevent any person from entering into a settlement
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1 agreement or executing a general release regarding a
2 potential or actual lawsuit filed under any of the provisions
3 of this Act, nor shall it prevent the arbitration of any
4 claim pursuant to the provisions of Title 9 of the United
5 States Code.
6 Section 5-10. Nonjudicial resolution of disputes.
7 Parties to a franchise or distributorship that is located in
8 this State may agree to arbitration, mediation, or other
9 nonjudicial resolution of an existing or future dispute in
10 this State. Any nonjudicial resolution of a dispute involving
11 a franchise or distributorship that is located in Illinois
12 must be conducted in Illinois. Arbitration shall be
13 conducted pursuant to the rules of the American Arbitration
14 Association.
15 Section 5-15. Other law.
16 (a) Principles of law and equity, including capacity to
17 contract, estoppel, fraud, misrepresentation, duress,
18 coercion, and mistake, supplement this Act.
19 (b) This Act does not limit (i) rights, privileges,
20 remedies, or duties that may exist under other law, or (ii)
21 the power of this State to punish a person for conduct
22 constituting a crime under other law.
23 Section 5-20. Unconscionability.
24 (a) If a court, as a matter of law, finds a franchise or
25 distributorship or a provision of either to have been
26 unconscionable when it was made, the court may so limit the
27 application of the unconscionable provision as to avoid an
28 unconscionable result, or it may enforce the remainder of the
29 agreement without the unconscionable provision, or if
30 necessary it may refuse to enforce the agreement.
31 (b) Before making a finding of unconscionability under
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1 subsection (a), the court, on motion of a party or its own
2 motion, shall afford the parties a reasonable opportunity to
3 present evidence as to the setting, purpose, application, and
4 effect of the agreement, provision, or conduct complained of.
5 Section 5-25. Action for damages and injunctive relief.
6 If a distributor, supplier, franchisee, or franchisor
7 violates this Act, the other party to the franchise or
8 distributorship agreement may bring an action in any court of
9 competent jurisdiction for damages sustained as a consequence
10 of the violation, and may also be granted injunctive relief
11 against unlawful termination, cancellation, nonrenewal, or
12 other harm. It is the policy of this State to avoid unfair
13 or wrongful terminations. Notwithstanding the provisions of
14 any franchise or distributorship agreement, the provisions of
15 the Code of Civil Procedure and Title 28 of the U.S. Code
16 concerning venue for any such action shall be applicable and
17 this Act shall apply.
18 Section 5-30. Application to arbitration agreements. A
19 franchise or distributorship agreement providing for binding
20 arbitration of disputes shall be valid and enforceable in
21 accordance with the Uniform Arbitration Act, except that
22 arbitration involving franchises and distributorships in this
23 State shall be conducted in this State. In the event that a
24 dispute concerning the existence of good cause for a
25 termination, cancellation, nonrenewal, or other harm is
26 resolved through arbitration, the definition of good cause
27 and the substantive provisions of this Act shall apply.
28 Section 5-35. Civil liability.
29 (a) A person injured or threatened with injury by a
30 violation of this Act or a rule promulgated or order issued
31 under this Act has a claim for relief for damages caused by
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1 the violation and other appropriate relief.
2 (b) The court may award reasonable attorney's fees to a
3 person who prevails in an action or proceeding under this
4 Act.
5 Section 5-40. Jurisdiction and venue. Any provision in a
6 franchise or distributorship agreement that designates
7 jurisdiction or venue in a forum outside of this State,
8 including forums for arbitration, mediation, or other
9 non-judicial remedies is void.
10 Section 5-45. Enforcement. The Administrator, with such
11 assistance as he may from time to time request of the state's
12 attorneys in the several counties, may institute proceedings
13 in the circuit court to prevent and restrain violations of
14 the provisions of this Act concerning franchises or of any
15 rule or order prescribed or issued under this Act. In such a
16 proceeding, the court shall determine whether a violation has
17 been committed, and shall enter such judgment or decree as it
18 considers necessary to remove the effects of any violation
19 and to prevent such violation from continuing or from being
20 renewed in the future. The court, in its discretion, may
21 exercise all powers necessary for this purpose, including,
22 but not limited to, injunction, revocation, forfeiture or
23 suspension of the charter, franchise, certificate of
24 authority or privileges of any corporation, association,
25 limited partnership or other business organization operating
26 under the laws of this State, dissolution of domestic
27 corporations or associations, suspension or termination of
28 the right of foreign corporations or associations to do
29 business in this State, or restitution or payment of damages
30 by a franchisor to persons injured by violations of this Act,
31 including without limitation an award of reasonable attorneys
32 fees and costs.
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1 Section 5-50. Civil penalties. In lieu of any penalty
2 provided pursuant to Section 5-55 of this Act, and in
3 addition to an action pursuant to Section 5-45 of this Act,
4 the Administrator may bring an action in the name and on
5 behalf of the people of the State against any person,
6 trustee, manager or other officer or agent of a corporation,
7 or against a corporation, domestic or foreign, to recover a
8 penalty in a sum not to exceed $50,000 per violation for the
9 doing in this State of any act herein declared illegal. The
10 action must be brought within 3 years after the commission of
11 the act upon which it is based.
12 Section 5-55. Criminal prosecution. Any person who
13 willfully sells a franchise in this State without complying
14 with Sections 2-20, 2-25, 2-35, 2-45, 4-10, or 4-15 of this
15 Act or who in a disclosure statement or an amendment thereto
16 willfully makes any false or misleading statement of a
17 material fact or willfully omits to state any material fact
18 required to be stated therein or necessary to make the
19 statements therein not misleading, commits a class 2 felony
20 and upon conviction shall be subject to such punishment as
21 provided by law. The Administrator, with such assistance as
22 he may from time to time request of the State's Attorneys in
23 the several counties, shall investigate suspected criminal
24 violations of this Act and shall commence and try all
25 prosecutions under this Act. Prosecutions under this Act may
26 be commenced by information or indictment. With respect to
27 the commencement and trial of such prosecutions instituted by
28 the Administrator, the Administrator shall have all of the
29 powers and duties vested by law in the state's attorneys with
30 respect to criminal prosecutions generally. A prosecution
31 for any offense under this Act must be commenced within 3
32 years after the commission thereof. Nothing in this Act
33 limits the power of the State to punish any person for any
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1 conduct which constitutes a crime under any other statute.
2 Section 5-60. Private civil actions. Any person who
3 offers, sells, terminates, or fails to renew a franchise or
4 who offers, terminates, or fails to renew a distributorship
5 in violation of this Act shall be liable to the franchisee or
6 distributor who may sue for damages caused thereby. This Act
7 is intended to clarify the existence of a private right of
8 action under existing law with respect to the termination or
9 nonrenewal of a franchise or distributorship in violation of
10 this Act. In the case of a violation of Section 2-20, 2-25,
11 2-45, 4-10, or 4-15 of the Act, the franchisee may also sue
12 for rescission.
13 No franchisee may sue for rescission under this Section
14 who shall fail, within 30 days from the date of receipt
15 thereof, to accept an offer to return the consideration paid
16 or to repurchase the franchise purchased by such person.
17 Every offer provided for in this Section shall be in writing,
18 shall be delivered to the franchisee or distributor or sent
19 by certified mail addressed to the franchisee or distributor
20 at such person's last known address, shall offer to return
21 any consideration paid or to repurchase a franchise for a
22 price equal to the full amount paid less any net income
23 received by the franchisee, plus the legal rate of interest
24 thereon, and may require the franchisee or distributor to
25 return to the person making such offer all unsold goods,
26 equipment, fixtures, leases and similar items received from
27 such person. Such offer shall continue in force for 30 days
28 from the date on which it was received by the franchisee or
29 distributor and shall advise the franchisee or distributor of
30 such rights and the period of time limited for acceptance
31 thereof. Any agreement not to accept or refusing or waiving
32 any such offer made during or prior to the expiration of said
33 30 days shall be void.
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1 The term "franchisee" as used in this Section shall
2 include the personal representative or representatives of the
3 franchisee.
4 The term "distributor" as used in this Section shall
5 include any personal representative of the distributor.
6 Every person who directly or indirectly controls a person
7 liable under this Section, every partner in a firm so liable,
8 every principal executive officer or director of a
9 corporation so liable, every person occupying a similar
10 status or performing similar functions, and every employee of
11 a person so liable, who materially aids in the act or
12 transaction constituting the violation, is also liable
13 jointly and severally with and to the same extent as such
14 person, unless said person who otherwise is liable had no
15 knowledge or reasonable basis to have knowledge of the facts,
16 acts or transactions constituting the alleged violation.
17 Every franchisee or distributor in whose favor judgment
18 is entered in an action brought under this Section shall be
19 entitled to the costs of the action including, without
20 limitation, reasonable attorney's fees.
21 Section 5-65. Periods of limitation. No action shall be
22 maintained under Section 5-60 of this Act to enforce any
23 liability created by this Act unless brought before the
24 expiration of 3 years after the act or transaction
25 constituting the violation upon which it is based, the
26 expiration of one year after the franchisee or distributor
27 becomes aware of facts or circumstances reasonably indicating
28 that he may have a claim for relief in respect to conduct
29 governed by this Act, or 90 days after delivery to the
30 franchisee or distributor of a written notice disclosing the
31 violation, whichever shall first expire. No cause of action
32 barred under existing law on the effective date of this Act
33 shall be revived by this Act. Every cause of action under
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1 this Act survives the death of any person who might have been
2 a plaintiff or defendant.
3 Section 5-70. No other civil liability. Except as
4 explicitly provided in this Act, no civil liability in favor
5 of any person shall arise against any person by implication
6 from or as a result of the violation of any provision of this
7 Act. Nothing in this Act shall limit any liability which may
8 exist by virtue of any other statute or under common law if
9 this Act were not in effect. Prior law exclusively governs
10 all suits, actions, prosecutions, or proceedings which are
11 pending or may be initiated on the basis of facts or
12 circumstances occurring before the effective date of this
13 Act.
14 Section 5-75. Certificate of registration or filing of
15 annual report; admissibility in evidence. In any civil or
16 criminal action brought under this Act, a Certificate under
17 the seal of this State, signed by the Administrator, stating
18 whether or not a franchise is registered, or whether or not
19 an annual report of a franchisor has been filed under Section
20 2-20 of this Act, or whether or not a person has registered
21 as a franchise broker under Section 2-35 of this Act, shall
22 constitute prima facie evidence of such matter, and shall be
23 admissible into evidence at trial without proof of foundation
24 or additional authenticity.
25 Section 5-80. Powers of the Administrator.
26 (a) Investigations. The Administrator may in his
27 discretion: (1) make such public or private investigations
28 inside or outside this State as he deems necessary (i) to
29 determine whether any person has violated, is violating, or
30 is about to violate any provision of this Act or any rule or
31 order prescribed or issued under this Act or (ii) to aid in
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1 the enforcement of this Act or in the prescribing of rules
2 under this Act; and (2) publish information concerning the
3 violation of this Act or any rule or order prescribed or
4 issued under this Act. No actions taken or orders issued by
5 the Administrator shall be binding on, nor in any way
6 preclude the Administrator from conducting any investigation
7 or commencing any action authorized under this Act. The
8 Administrator or any of his assistants may participate in any
9 hearings conducted by the Administrator under this Act and
10 the Administrator may provide such assistance as the
11 Administrator believes necessary to effectively fulfill the
12 purposes of this Act.
13 (b) Subpoenas. For the purpose of any investigation or
14 proceeding under this Act and prior to the commencement of
15 any civil or criminal action as provided for in this Act, the
16 Administrator has the authority to subpoena witnesses, compel
17 their attendance, examine them under oath, or require the
18 production of any books, documents, records or tangible
19 things, hereafter referred to as "documentary material",
20 which the Administrator deems relevant or material to his
21 investigation, for inspection, reproducing or copying under
22 such terms and conditions as are hereafter set forth. Any
23 subpoena issued by the Administrator shall contain the
24 following information: (1) the statute and section thereof,
25 the alleged violation of which is under investigation; (2)
26 the date, place and time at which the person is required to
27 appear or produce documentary material in his possession,
28 custody or control at a designated office of the
29 Administrator, which date shall not be less than 10 days from
30 date of service of the subpoena; and (3) where documentary
31 material is required to be produced, the same shall be
32 prescribed by class so as to clearly indicate the material
33 demanded.
34 (c) Production of documentary material. The
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1 Administrator is hereby authorized, and may so elect to
2 require the production, pursuant to this Section of
3 documentary material prior to the taking of any testimony of
4 the person subpoenaed, in which event such documentary
5 material shall be made available for inspection and copying
6 during normal business hours at the principal place of
7 business of the person served, or at such other time and
8 place as may be agreed upon by the person served and the
9 Administrator. When documentary material is demanded by
10 subpoena, said subpoena shall not (1) contain any requirement
11 which would be unreasonable or improper if contained in a
12 subpoena duces tecum issued by a court of this State; or (2)
13 require the disclosure of any documentary material which
14 would be privileged, or which for any other reason would not
15 be required by a subpoena duces tecum issued by a court of
16 this State.
17 (d) Service of subpoenas. Service of a subpoena of the
18 Administrator as provided herein may be made by (1) delivery
19 of a duly executed copy thereof to the person served or if a
20 person is not a natural person, to the principal place of
21 business of the person to be served, or (2) mailing by
22 certified mail, return receipt requested, a duly executed
23 copy thereof addressed to the person to be served at his
24 principal place of business in this State, or, if said person
25 has no place of business in this State, to his principal
26 office.
27 (e) Examination of witnesses. The examination of all
28 witnesses under this Section shall be conducted by the
29 Administrator, or by his deputy designated by him, before an
30 officer authorized to administer oaths in this State. The
31 testimony shall be taken stenographically or by a sound
32 recording device and shall be transcribed.
33 (f) Fees. All persons served with a subpoena by the
34 Administrator under this Act shall be paid the same fees and
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1 mileage as are paid to witnesses in the courts of this State.
2 (g) Judicial enforcement of subpoenas. In the event a
3 witness served with a subpoena by the Administrator under
4 this Act fails or refuses to obey same or to produce
5 documentary material as provided herein or to give testimony
6 relevant or material to the investigation being conducted,
7 the Administrator may petition any circuit court for an order
8 requiring said witness to attend and testify or produce the
9 documentary material demanded. Thereafter, any failure or
10 refusal on the part of the witness to obey such order of
11 court may be punishable by the court as a contempt thereof.
12 (h) Immunity from prosecution. No person is excused
13 from attending and testifying or from producing any document
14 or records before the Administrator in obedience to the
15 subpoena of the Administrator, in any proceeding instituted
16 by the Administrator and authorized by this Act, on the
17 ground that the testimony or evidence, documentary or
18 otherwise, required of him may tend to incriminate him or
19 subject him to a penalty or forfeiture. No individual may be
20 prosecuted or subjected to any penalty or forfeiture for or
21 on account of any transaction, matter, or thing concerning
22 which he is compelled, after validly claiming his privilege
23 against self-incrimination, to testify or produce evidence,
24 documentary or otherwise, except that the individual
25 testifying is not exempt from prosecution and punishment for
26 perjury or contempt committed in testifying.
27 (i) Administrator entitled to recover costs. In any
28 action brought under the provisions of this Act, the
29 Administrator is entitled to recover costs for the use of
30 this State.
31 Section 5-85. Hearings.
32 (a) Notice required. If a hearing is requested or
33 ordered under any provision of this Act, the Administrator
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1 shall set the matter for hearing and notice of the time and
2 place for the hearing shall be sent to the franchisor at
3 least 7 days prior to the hearing.
4 (b) Manner of giving notice. Notice required by this
5 Section is sufficient if sent by registered or certified mail
6 and addressed to the franchisor at the address designated in
7 the disclosure statement.
8 (c) Opportunity to be present and heard. The parties to
9 any hearing shall be accorded ample opportunity to present,
10 in person or by counsel, such statements, testimony, evidence
11 and argument as may be pertinent.
12 (d) Record. All testimony taken at any hearing before
13 the Administrator shall be reported stenographically or by a
14 sound recording device and a full and complete record shall
15 be kept of all proceedings.
16 (e) Written decisions required. After a hearing, the
17 Administrator shall issue a written decision modifying,
18 vacating or extending the order and shall state the reasons
19 for his decision.
20 Section 5-90. Judicial review. All final administrative
21 decisions of the Administrator hereunder shall be subject to
22 judicial review pursuant to the Administrative Review Law, as
23 amended, and any rules adopted pursuant thereto. The term
24 "administrative decision" is defined as in Section 3-101 of
25 the Code of Civil Procedure.
26 Section 5-95. Service of process. Sufficient service of
27 any process in any action brought by a franchisee or
28 franchisor under this Act may be made by serving a copy
29 thereof with the agency designated to receive process in the
30 disclosure statement filed with the Administrator or in the
31 absence of such agent at the principal business address set
32 forth in the disclosure statement. Where no disclosure
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1 statement has been filed and personal jurisdiction cannot
2 otherwise be obtained in this State over a person who engaged
3 in conduct prohibited or made actionable by this Act or any
4 rule or order hereunder, that conduct shall be considered
5 equivalent to the appointment of the Administrator to be such
6 person's attorney to receive service of any lawful process in
7 any noncriminal suit, action or proceeding against him or his
8 successor, executor, or administrator which grows out of that
9 conduct and which is brought under this Act or any rule or
10 order hereunder, with the same force and validity as if
11 served on him personally. Service may be made by leaving a
12 copy of the process in the office of the Administrator, but
13 it is not effective unless (a) the plaintiff forthwith sends
14 notice of the service and a copy of the process by registered
15 or certified mail to the defendant or respondent at his last
16 known address or takes other steps which are reasonably
17 calculated to give actual notice and (b) the plaintiff's
18 affidavit of compliance with this Section is filed in the
19 case on or before the return day of the process, if any, or
20 within such further time as the court allows.
21 Section 5-100. Burden of proof. In any proceeding under
22 this Act, the burden of proving an exemption or an exception
23 from a definition is upon the person claiming it.
24 ARTICLE VI
25 REPEALER
26 (815 ILCS 705/Act rep.)
27 Section 6-5. The Franchise Disclosure Act of 1987 is
28 repealed.