California Franchise Legislation (AB 525) Moving Through Senate

Tomorrow (Monday, June 29, 2015), California State Assembly Bill (AB) 525 will be considered by the Senate Business, Professions and Economic Development Committee. If passed by the Senate, AB 525 will amend the existing California Franchise Relations Act (Business and Professions Code §§ 20000 – 20010) (“CFRA”) by expanding protections for existing franchisees. See my previous blog post for a discussion of the amendments to the CFRA that would be created by AB 525.

While the Senate has made some minor clean-up amendments to AB 525, none of them substantially change the character of the bill or the amendments that it would create to AB 525.

The International Franchise Association (“IFA”) has mounted a significant challenge to AB 525, having sent to its California-based members an email urging them to contact their elected officials and voice opposition to the bill. From the IFA’s email:

This bill in its current form places the basic tenets of the franchise contract at risk, which ultimately would harm franchisees, franchisors and consumers in California. This is a dangerous precedent, as this legislation could damage the reputation of local franchise business owners by reducing their brand standards. The unintended consequences of this legislation will also drastically increase incentives for litigation.

As an interesting example of politics making strange bedfellows, one of the key sponsors to AB 525 is the Service Employees International Union (SEIU). The SEIU is the driving force behind the National Labor Relations Board’s (NLRB) push to hold franchisors liable for their franchisees’ employees as “joint employers,” which push is widely considered to be a significant threat to the franchise industry as a whole. According to Catherine Monson, CEO of FASTSIGNS, AB 525 is part of the SEIU’s “coordinated attack on the franchise business model.”

To assist the IFA in its campaign to defeat AB 525, you can follow this link: https://www.votervoice.net/FRANCHISE/Campaigns/39986/Respond

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