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New Franchise Legislation In California Tabled Until Next Year

As I've reported previously, the California legislature has during this session been considering a bill that would add additional regulation to the franchisor-franchisee relationship.  As proposed, Senate Bill 610 would have modified the existing California Franchise Relationship Act (the "CFRA") by:

  1. Requiring franchisors to deal in good faith with their franchisees;

  2. Expressly permitting franchisees to join or participate in an association of franchisees; and

  3. Allowing a franchisee to sue a franchisor or subfranchisor that violates the CFRA for damages, rescission, or other relief deemed appropriate by a court.

All consideration of SB 610 ended for the year when, last night, the bill's sponsor pulled the legislation off the docket. Apparently, this was because the bill had little support among the Democrats and Republicans on the California Assembly's Business, Professions & Consumer Protections Committee, which was scheduled to consider the bill today. 

The International Franchise Association, which lobbied strenuously against SB 610, called last night's actions "a critically important victory for the IFA and the franchising industry." The IFA further commented that "SB 610 undermined brand integrity by allowing substandard operators to remain in operation. . . [which] in turn hurts franchise brands and the equity and investment of both franchisors and franchisees."  

Robert Purvin, Chair of the American Association of Franchisees and Dealers (which co-sponsored the bill) commented that "[i]t was clear that we wouldn't have the votes [this year], although we discerned sympathy for the cause." 

Consideration of SB 610 has been tabled for now, but may be reconsidered by the Business, Professions & Consumer Protections Committee next year.

© Copyright 2020 Armstrong Teasdale LLP. All rights reserved National Law Review, Volume III, Number 226


About this Author

Armstrong Teasdale lawyers practice extensively in the areas of franchising and distribution, including the development of new franchise systems, preparation of franchise offering circulars, compliance with federal and state requirements, contract negotiation, trials and appeals in all courts, representation in arbitration proceedings, mediation, and assistance in evaluating the impact of these areas on other client operations.

Franchise and distribution lawyers review, analyze and stay current with legislation and regulations promulgated by government authorities. Additionally,...