California now has one of the country’s strongest franchisee protection laws after Gov. Jerry Brown signed the Small Business Investment Protection Act earlier this month. The signature capped years of effort by franchisees to pass franchisee rights legislation in the Golden State.
“The law protects franchise owners from franchisors who seek to terminate their business on a whim or from franchisors who desire to take possession of a lucrative franchise without compensating the franchise owner,” wrote Don Sniegowski on franchisee news site Blue Mau Mau.
Under the new law:
- It will be harder for franchisors to terminate franchisees, and franchisees will have more time to fix most violations before they can be terminated.
- Franchisors will have to buy certain items from franchisees if they terminate or refuse to renew a franchise. This means franchisees will not lose every dollar they invested if a franchisor terminates or refuses to renew them.
- Franchisees will have an easier time selling their units: Franchisors will have to approve proposed sales if the buyer is qualified and the franchisee follows the franchisor’s transfer process.
The Service Employees International Union joined forces with franchisees to press for the bill. SEIU President Mary Kay Henry called it “a critical step forward, and it signals that when workers and small businesses join together, we can force multinational corporations to take a step back and treat us more fairly.”
Keith Miller, chair of the Coalition of Franchisee Associations, which sponsored the bill, told Blue Mau Mau, “This is not the end of the journey,” adding, “There are still few states with meaningful franchise laws to protect franchisees.”