Franchisee rights bill advances in California

A franchisee rights bill has cleared two committees in the State Legislature and is headed for a vote on the State Assembly floor in May. The California Small Business Investment Protection Act passed the Assembly Committee on Business and Professions unanimously 11-0 on April 28 after clearing the Assembly Judiciary Committee on April 21.

The bill:

  • Bars franchisors from terminating franchisees unless franchisees fail to substantially comply with their contracts, using language found in several other state laws.
  • Guarantees franchisees the opportunity to fix most violations before franchisors can terminate them based on those violations.
  • Protects franchisees’ rights to sell their business to a qualified buyer so they can retire.
  • Requires franchisors in most circumstances to compensate franchisees if they terminate or refuse to renew a franchise.

California Gov. Jerry Brown last year vetoed a similar bill, SB 610.

Coalition of Franchisee Associations Chair Keith Miller, a Subway franchisee, called on committee members to protect the small business franchise owners who support their communities and create jobs. “Franchisees are increasingly concerned that they will not be able to realize the fruits of their labor,” he said. “Without these protections all may be lost, including their life savings and source of income,” in the event of a termination or nonrenewal. Kathryn Slater-Carter, a former McDonald’s California franchisee who helped launch franchise reform efforts in California, also spoke, calling the bill “a small step.”