Source: https://www.goldlawgroup.com/franchise-laws/illinois/
Timestamp: 2019-04-21 06:31:21+00:00

Document:
Illinois regulates certain aspects of the ongoing franchise relationship through its Franchise Disclosure Act of 1987 (“IFDA”).
Section 705/19 governs franchise terminations. The IFDA makes it a violation for a franchisor to terminate a franchise prior to the expiration of its term except for "good cause." In turn, the IFDA defines “good cause” as including, but not be limited to, the failure of the franchisee to comply with any lawful provisions of the franchise or other agreement and to cure such default after being given: (1) notice thereof and (2) a reasonable opportunity to cure such default. The cure period under the Act need not be more than 30 days.
The IFDA goes on to create a certain sub-category of “good cause” terminations that do not require notice and an opportunity to cure. In this regard, the Act states that "good cause" shall include, but without the requirement of notice and an opportunity to cure, situations in which the franchisee: (1) makes an assignment for the benefit of creditors or a similar disposition of the assets of the franchise business; (2) voluntarily abandons the franchise business; (3) is convicted of a felony or other crime which substantially impairs the good will associated with the franchisor's trademark, service mark, trade name or commercial symbol; or (4) repeatedly fails to comply with the lawful provisions of the franchise or other agreement.
Section 705/20 of the IFDA deals with franchise non-renewals. Section 20 expresses that it is a violation of the Act for a franchisor to refuse to renew a franchise without compensating the franchisee either by repurchase or by other means for the diminution in the value of the franchised business caused by the expiration of the franchise where: (a) the franchisee is barred by the franchise agreement (or by the refusal of the franchisor at least 6 months prior to the expiration date of the franchise to waive any portion of the franchise agreement which prohibits the franchisee) from continuing to conduct substantially the same business under another trademark, service mark, trade name or commercial symbol in the same area subsequent to the expiration of the franchise; or (b) the franchisee has not been sent notice of the franchisor's intent not to renew the franchise at least 6 months prior to the expiration date or any extension thereof of the franchise.
Section 705/18 of the IFDA deals with discrimination between franchisees. Section 18 declares that it will be an unfair franchise practice and a violation of this Act for any franchisor to unreasonably and materially discriminate between franchisees operating a franchised business located in this State in the charges offered or made for franchise fees, royalties, goods, services, equipment, rentals or advertising services, if such discrimination will cause competitive harm to a franchisee who competes with a franchisee that received the benefit of the discrimination. However, it also creates an exception to this rule for any classification of or discrimination between franchisees that is: (a) based on franchises granted at different times, and such discrimination is reasonably related to such differences in time; (b) related to one or more programs for making franchises available to persons with insufficient capital, training, business experience or education, or lacking other qualifications; (c) related to local or regional experimentation with or variations in product or service lines or business formats or designs; (d) related to efforts by one or more franchisees to cure deficiencies in the operation of franchise businesses or defaults in franchise agreements; or (e) based on other reasonable distinctions considering the purposes of this Act and is not arbitrary.
Section 705/17 of the IFDA declares that it is an unfair franchise practice and a violation of this Act for a franchisor to in any way restrict any franchisee from joining or participating in any trade association.
As do other franchise relationship laws, the IFDA specifically states that nothing in the Act will limit any liability which may exist by virtue of any other statute or under common law if this Act were not in effect.
815 Ill. Comp. Stat. Ann. §720/1 to §720/10 .
815 Ill. Comp. Stat. Ann. §710/10.1 .
Bell v. Bimbo Foods Bakeries Distribution, Inc., United States District Court, N.D. Illinois, Eastern Division, July 2, 2012, 2012 WL 2565849 (“The Illinois Franchise Disclosure Act prohibits a franchisor from terminating a franchise before the expiration of the franchise term except for good cause. 815 ILCS 705/19. Illinois courts have not considered whether termination under the Act includes only actual termination or also encompasses some form of “constructive termination.” Although Illinois courts have not explicitly addressed this question, one can draw parallels from the Illinois courts' recognition of constructive termination in the employment discrimination context, under the Illinois Human Rights Act, 775 ILCS 5/1–101 et seq. See Stone v. Dep't of Human Rights, 299 Ill.App.3d 306, 233 Ill.Dec. 397, 700 N.E.2d 1105, 1112 (Ill.App.Ct.1998); Steele v. Ill. Human Rights Comm'n, 160 Ill.App.3d 577, 112 Ill.Dec. 568, 513 N.E.2d 1177, 1179–80 (Ill.App.Ct.1987) (“Constructive discharge occurs when an employer deliberately makes an employee's working conditions so intolerable that the employee is forced to resign involuntarily....”). Although the Illinois Human Rights Act does not explicitly prohibit constructive termination based on discrimination, 775 ILCS 5/2–102, Illinois courts approved the cognizability of such claims from the general prohibitions on discrimination. Steele, 112 Ill.Dec. 568, 513 N.E.2d at 1179. In order to amount to constructive termination, an employer's conduct must have resulted in “working conditions ... so difficult or unpleasant that a reasonable person in the employee's shoes would have felt compelled to resign.” Id. at 1180 (quotation and citation omitted). For example, a single instance of demotion, unaccompanied by any other discriminatory acts, does not comprise a constructive discharge where the employee retains the same salary and benefits in spite of any perceived reduction in responsibility. Id. at 1181. Courts elsewhere have also recognized constructive termination claims under similar state franchise protection statutes. See, e.g., Girl Scouts of Manitou Council v. Girl Scouts of USA, 646 F.3d 983, 989 (7th Cir.2011) (Wisconsin law); Petereit v. S.B. Thomas, Inc., 63 F.3d 1169, 1181–82 (2d Cir.1995) (Connecticut law). The reason for this, as in the employment context, is to avoid leaving “a big loophole” that would allow franchisors to force franchisees out without officially terminating them, thus circumventing the statute. Al's Serv. Ctr. v. BP Prods. N. Am., Inc., 599 F.3d 720, 726 (7th Cir.2010). In light of the analogy to the Illinois Human Rights Act, and the supporting case law interpreting other states' franchise laws, a constructive termination should qualify as a “termination” under the Illinois Franchise Disclosure Act. The Court need not, however, decide that question definitively, because there has been no termination here, constructive or otherwise. Assuming, for purposes of this case, that there can be a cause of action for constructive discharge under the Franchise Disclosure Act, Bell has not alleged that the distributorship has terminated. That is, there is no allegation that Bell's actual distributorship has come to an end. On the contrary, Bell continues to operate the business under his Distributor Agreement. R. 36 ¶¶ 6, 23. Because Bell's distributorship is ongoing, Bell cannot allege that Bimbo engaged in conduct that rendered Bell's situation so untenable that it effectively forced him out of his distributorship. In Mac's Shell Service v. Shell Oil Products Co., the Supreme Court declined to decide whether the Petroleum Marketing Practices Act-a federal statute that protects gas station franchisees-created a cause of action for constructive termination. ––– U.S. ––––, ––––, 130 S.Ct. 1251, 1257, 176 L.Ed.2d 36 (2010). But if it did create such a claim, the Court held, a necessary element of the claim would be that the franchisor's conduct forced an end to the franchisee's use of the franchisor's trademark, purchase of the franchisor's fuel, or occupation of the franchisor's service station. Id.

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