Opinion ID: 1280950
Heading Depth: 1
Heading Rank: 3

Heading: Encroachment Provision

Text: Iowa Code section 523H.6(1), Encroachment, provides: Notwithstanding the terms, provisions, or conditions of an agreement or franchise, if a franchisor seeks to establish a new outlet, company-owned store, or carry-out store within an unreasonable proximity of an existing franchise, the existing franchisee, at the option of the franchisor, shall have either a right of first refusal with respect to the proposed new outlet, company-owned store, or carry-out store or a right to compensation for market share diverted by the new outlet. (Emphasis added.) Holiday Inns argues the language of section 523H.6(1) is unambiguous and provides if a franchisor establishes a new outlet, company-owned store, or carry-out store within an unreasonable proximity of an existing franchise, the franchisor must comply with the section's provisions even if the new outlet, company-owned store, or carry-out store is located outside of Iowa's borders. Holiday Inns further asserts even if we find section 523H.6(1) unambiguous, we should hold the section does not place the same territorial restriction on new outlets, company-owned stores, or carry-out stores chapter 523H places on franchises. The defendants contend the statute is ambiguous and the legislature only intended the requirements of section 523H.6(1) to apply when a franchisor establishes new outlets, company-owned stores, or carry-out stores within the state of Iowa. We hold that section 523H.6(1) is ambiguous because reasonable minds could disagree as to whether the legislature intended its provisions to apply when a new outlet, company-owned store, or carry-out store is established outside the borders of the state of Iowa. See Green, 470 N.W.2d at 18; Schlemme, 301 N.W.2d at 723. This ambiguity arises because, although section 523H.2 states the chapter only applies to franchises operated within the state of Iowa, the chapter does not define the terms outlet, company-owned store, or carry-out store, and it is unclear whether the territorial limitation section 523H.2 places on franchises also applies to new outlets, company-owned stores, or carry-out stores. See Green, 470 N.W.2d at 18; Thompson, 259 Iowa at 468, 143 N.W.2d at 330; Chicago, Burlington & Quincy R.R., 259 Iowa at 183, 142 N.W.2d at 409-10. In seeking to determine the legislature's intent, we consider all parts of an enactment together and do not give any single or isolated portion undue importance. General Elec. v. Iowa State Bd. of Tax Review, 492 N.W.2d 417 (Iowa 1992). The applicability provision of chapter 523, section 523H.2, demonstrates an overwhelming intention on the part of the legislature to limit the application of the chapter to stores operated within the borders of the state of Iowa. Given this clear, manifest intent of the legislature, it would not be reasonable for us to interpret section 523H.6(1) to apply beyond the borders of Iowa when a franchisor seeks to establish a new outlet, company-owned store, or carry-out store outside of the state of Iowa, but not when a franchisor seeks to establish a store firmly falling within the definition of franchise outside of the borders of the state of Iowa. A consideration of all relevant provisions of chapter 523H convinces us the legislature did not intend the chapter to apply to any stores operated under the name of a franchisor, whether as a company-owned store or as a store operating under a franchise license, outside of the borders of the state of Iowa. We therefore hold that unreasonable proximity does not encompass any franchise-related stores, including new outlets, company-owned stores, or carry-out stores operated outside of the borders of the state of Iowa. Although this interpretation will not protect all franchisees within the state of Iowa from perceived abuses on the part of franchisors, we believe chapter 523 manifests the legislature's recognition of the extent to which it may lawfully regulate commercial activities affecting the State of Iowa.