BILL NUMBER: AB 525	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 6, 2015

INTRODUCED BY   Assembly  Member   Holden
  Members   Holden   and Atkins 

                        FEBRUARY 23, 2015

   An act to amend  Section 7563 of the Business and
Professions Code, relating to private investigators, and declaring
the urgency thereof, to take effect immediately.  
Sections 20020, 20021, and 20036 of, to amend the heading of Article
6 (commencing with Section 20035) of Chapter 5.5 of Division 8 of, to
add Sections 20022, 20028, and 20029 to, and to repeal and add
Sections 20025 and 20035 of, the Business and Professions Code,
relating to franchises. 



	LEGISLATIVE COUNSEL'S DIGEST


   AB 525, as amended, Holden.  Private Investigators: fines.
  Franchise relations: renewal and termination. 

   The California Franchise Relations Act sets forth certain
requirements related to the termination, nonrenewal, and transfer of
franchises between a franchisor, subfranchisor, and franchisee, as
those terms are defined.  
   That act, except as otherwise provided, prohibits a franchisor
from terminating a franchise prior to the expiration of its term,
except for good cause, which includes, but is not limited to, the
failure of the franchisee to comply with any lawful requirement of
the franchise agreement after being given notice and a reasonable
opportunity to cure the failure within 30 days.  
   This bill would instead limit good cause to be the failure of the
franchisee to comply with any lawful requirement of the franchise
agreement after being given notice at least 60 days in advance and a
reasonable opportunity to cure the failure within 60 days or more.
 
   The act prohibits a franchisor from failing to renew a franchise
agreement unless the franchisor provides the franchisee at least 180
day's prior written notice of its intention not to renew and
specified conditions are met.  
   This bill would instead prohibit a franchisor from failing to
renew a franchise agreement unless the franchisee has failed to
substantially comply with the franchise agreement. The bill would
allow the franchisee to renew for the same duration as provided in
the expiring franchise agreement and would require the renewal to be
under the franchise agreement terms that are being offered to new
franchises. The bill would require, if the franchisor has grounds not
to renew a franchise, the franchisor to provide written notice of
its intention not to renew at least 180 days prior to the termination
of the existing franchise agreement. The bill would, upon
termination or expiration of the franchise, prohibit the franchisor
from seeking to enforce against the franchisee any covenant not to
compete.  
   This bill would make it unlawful for a franchise agreement to
prevent a franchisee from selling or transferring a franchise or a
part of an interest of a franchise to another person, provided that
the person is qualified under the franchisor's then-existing and
reasonable standards for approval of new franchisees.  
   This bill would provide that a franchise agreement require the
franchisee, prior to the sale, assignment, or transfer of all or
substantially all of the assets of the franchise business, or a
controlling interest in the franchise business, to another person, to
notify the franchisor of the franchisee's decision to sell,
transfer, or assign the franchise, and would require the notice to be
in writing and include specified information. The bill would provide
that the franchise agreement require the franchisor, within a
specified period, to notify the franchisee of the approval or
disapproval of the sale, assignment, or transfer of the franchise,
and would require the notice to be in writing and be personally
served on the franchisee or sent by certified mail, return receipt
requested. The bill would deem a proposed sale, assignment, or
transfer approved, unless disapproved by the franchisor, as
specified.  
   The act requires a franchisor that terminates or fails to renew a
franchise, other than in accordance with specified provisions of law,
to offer to repurchase from the franchisee the franchisee's
resalable current inventory, as specified.  
   This bill would require a franchisor that terminates or fails to
allow the renewal, sale, assignment, or transfer of a franchise,
other than in accordance with specified provisions of law, to, at the
election of the franchisee, either reinstate the franchisee and pay
specified damages or pay the franchisee the fair market value of the
franchise and franchise assets, as provided.  
   This bill would also allow a franchisee to have the opportunity to
monetize any equity the franchise may have developed in the
franchise business prior to the termination of the franchise
agreement, as specified.  
   The Private Investigator Act provides for the licensure and
regulation of private investigators by the Bureau of Security and
Investigative Services within the Department of Consumer Affairs and
makes a violation of the licensing requirements a crime. The act
authorizes the Director of Consumer Affairs to impose a civil penalty
of no greater than $500 instead of suspending or revoking a license
issued under the act for the violation of specified provisions if the
director determines that the imposition of the civil penalty better
serves the purposes of the act.  
   This bill would increase that civil penalty to an amount no
greater than $1,000 instead of $500.  
   This bill would declare that it is to take effect immediately as
an urgency statute. 
   Vote:  2/3   majority . Appropriation:
no. Fiscal committee: no. State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 20020 of the  
Business and Professions Code  is amended to read: 
   20020.  Except as otherwise provided by this chapter, no
franchisor may terminate a franchise prior to the expiration of its
term, except for good cause. Good cause shall  include, but
not  be limited  to,   to  the
failure of the franchisee to  substantially  comply with any
lawful requirement of the franchise agreement after being given
notice  at least 60 days in   advance  thereof and
a reasonable opportunity, which in no event need be more
  shall be less  than  30   60
 days, to cure the failure.
   SEC. 2.    Section 20021 of the   Business
and Professions Code   is amended to read: 
   20021.  If during the period in which the franchise is in effect,
there occurs any of the following events which is relevant to the
franchise, immediate notice of termination without an opportunity to
cure, shall be deemed reasonable:
   (a) The franchisee or the business to which the franchise relates
has been the subject of an order for relief in bankruptcy, judicially
determined to be insolvent, all or a substantial part of the assets
thereof are assigned to or for the benefit of any creditor, or the
franchisee admits his or her inability to pay his or her debts as
they come due;
   (b) The franchisee abandons the franchise by failing to operate
the business for five consecutive days during which the franchisee is
required to operate the business under the terms of the franchise,
or any shorter period after which it is not unreasonable under the
facts and circumstances for the franchisor to conclude that the
franchisee does not intend to continue to operate the franchise,
unless such failure to operate is due to fire, flood, earthquake or
other similar causes beyond the franchisee's control;
   (c) The franchisor and franchisee agree in writing to terminate
the franchise;
   (d) The franchisee makes any material misrepresentations relating
to the acquisition of the franchise business or the franchisee
engages in conduct which reflects materially and unfavorably upon the
operation and reputation of the franchise business or system;
   (e) The franchisee fails, for a period of 10 days after
notification of noncompliance, to comply with any federal, state or
local law or  regulation   regulation,
including, but not limited to, all health, safety, building, and
labor laws or regulations  applicable to the operation of the
franchise;
   (f) The franchisee, after curing any failure in accordance with
Section 20020 engages in the same noncompliance whether or not such
noncompliance is corrected after notice;
   (g) The franchisee repeatedly fails to comply with one or more
requirements of the franchise, whether or not corrected after notice;

   (h) The franchised business or business premises of the franchise
are seized, taken over, or foreclosed by a government official in the
exercise of his or her duties, or seized, taken over, or foreclosed
by a creditor, lienholder or lessor, provided that a final judgment
against the franchisee remains unsatisfied for 30 days (unless a
supersedeas or other appeal bond has been filed); or a levy of
execution has been made upon the license granted by the franchise
agreement or upon any property used in the franchised business, and
it is not discharged within five days of such levy;
   (i) The franchisee is convicted of a felony or any other criminal
misconduct which is relevant to the operation of the franchise;
   (j) The franchisee fails to pay any franchise fees or other
amounts due to the franchisor or its affiliate within five days after
receiving written notice that such fees are overdue; or
   (k) The franchisor makes a reasonable determination that continued
operation of the franchise by the franchisee will result in an
imminent danger to public health or safety.
   SEC. 3.    Section 20022 is added to the  
Business and Professions Code   , to read:  
   20022.  While not transferring any equity in the franchisor's
intellectual property to the franchisee, a franchisee shall have the
opportunity to monetize any equity the franchisee may have developed
in the franchised business prior to the termination of the franchise
agreement. 
   SEC. 4.    Section 20025 of the   Business
and Professions Code   is repealed.  
   20025.  No franchisor may fail to renew a franchise unless such
franchisor provides the franchisee at least 180 days prior written
notice of its intention not to renew; and
   (a) During the 180 days prior to expiration of the franchise the
franchisor permits the franchisee to sell his business to a purchaser
meeting the franchisor's then current requirements for granting new
franchises, or if the franchisor is not granting a significant number
of new franchises, the then current requirements for granting
renewal franchises; or
   (b) (1) The refusal to renew is not for the purpose of converting
the franchisee's business premises to operation by employees or
agents of the franchisor for such franchisor's own account, provided,
that nothing in this paragraph shall prohibit a franchisor from
exercising a right of first refusal to purchase the franchisee's
business; and
   (2) Upon expiration of the franchise, the franchisor agrees not to
seek to enforce any covenant of the nonrenewed franchisee not to
compete with the franchisor or franchisees of the franchisor; or
   (c) Termination would be permitted pursuant to Section 20020 or
20021; or
   (d) The franchisee and the franchisor agree not to renew the
franchise; or
   (e) The franchisor withdraws from distributing its products or
services through franchises in the geographic market served by the
franchisee, provided that:
   (1) Upon expiration of the franchise, the franchisor agrees not to
seek to enforce any covenant of the nonrenewed franchisee not to
compete with the franchisor or franchisees of the franchisor; and
   (2) The failure to renew is not for the purpose of converting the
business conducted by the franchisee pursuant to the franchise
agreement to operation by employees or agents of the franchisor for
such franchisor's own account; and
   (3) Where the franchisor determines to sell, transfer, or assign
its interest in a marketing premises occupied by a franchisee whose
franchise agreement is not renewed pursuant to this paragraph:
   (A) The franchisor, during the 180-day period after giving notice
offers such franchisee a right of first refusal of at least 30 days'
duration of a bona fide offer, made by another to purchase such
franchisor's interest in such premises; or
   (B) In the case of the sale, transfer, or assignment to another
person of the franchisor's interest in one or more other controlled
marketing premises, such other person in good faith offers the
franchisee a franchise on substantially the same terms and conditions
currently being offered by such other person to other franchisees;
or
   (f) The franchisor and the franchisee fail to agree to changes or
additions to the terms and conditions of the franchise agreement, if
such changes or additions would result in renewal of the franchise
agreement on substantially the same terms and conditions on which the
franchisor is then customarily granting renewal franchises, or if
the franchisor is not then granting a significant number of renewal
franchises, the terms and conditions on which the franchisor is then
customarily granting original franchises. The franchisor may give the
franchisee written notice of a date which is at least 30 days from
the date of such notice, on or before which a proposed written
agreement of the terms and conditions of the renewal franchise shall
be accepted in writing by the franchisee. Such notice, when given not
less than 180 days before the end of the franchise term, may state
that in the event of failure of such acceptance by the franchisee,
the notice shall be deemed a notice of intention not to renew at the
end of the franchise term. 
   SEC. 5.    Section 20025 is added to the  
Business and Professions Code   , to read:  
   20025.  (a) No franchisor may fail to renew a franchise unless the
franchisee has failed to substantially comply with the franchise
agreement.
   (b) If the franchisee is in substantial compliance with the
franchise agreement at the time of the expiration of the franchise
agreement, the franchisee may renew for the same duration as provided
in the expiring franchise agreement. The renewal shall be under the
franchise agreement terms that are being offered to new franchises.
   (c) If the franchisor has grounds not to renew a franchise under
this chapter, then the franchisor shall provide written notice of its
intention not to renew, as set forth in this chapter, at least 180
days prior to the termination of the existing franchise agreement.
   (d) Upon termination or expiration of the franchise, the
franchisor shall not seek to enforce against the franchisee any
covenant not to compete. 
   SEC. 6.    Section 20028 is added to the  
Business and Professions Code   , to read:  
   20028.  (a) It is unlawful for a franchise agreement to prevent a
franchisee from selling or transferring a franchise or a part of an
interest of a franchise to another person, provided that the person
is qualified under the franchisor's then-existing and reasonable
standards for approval of new franchisees.
   (b) Notwithstanding subdivision (a), a franchisee shall not have
the right to sell, transfer, or assign the franchise, or any right
thereunder, without the written consent of the franchisor, except
that the consent shall not be unreasonably withheld. 
   SEC. 7.    Section 20029 is added to the  
Business and Professions Code   , to read:  
   20029.  (a) The franchise agreement shall require the franchisee,
prior to the sale, assignment, or transfer of all or substantially
all of the assets of the franchise business, or a controlling
interest in the franchise business, to another person, to notify the
franchisor, of the franchisee's decision to sell, transfer or assign
the franchise. The notice shall be in writing and include all of the
following:
   (1) The proposed transferee's name and address.
   (2) A copy of all agreements related to the sale, assignment, or
transfer of the franchised business or its assets.
   (3) The proposed transferee's application for approval to become
the successor franchisee. The application shall include all forms and
related information generally utilized by the franchisor in
reviewing prospective new franchisees, if those forms are readily
made available to the existing franchisee. As soon as practicable
after the receipt of the proposed transferee's application, the
franchisor shall notify, in writing, the franchisee and the proposed
transferee of any additional information necessary to complete the
transfer application.
   (b) (1) The franchise agreement shall require the franchisor,
within 60 days after the receipt of all of the necessary information
required pursuant to subdivision (a), or as specified by written
agreement between the franchisor and the franchisee, to notify the
franchisee of the approval or disapproval of the sale, assignment, or
transfer of the franchise. The notice shall be in writing and be
personally served on the franchisee or sent by certified mail, return
receipt requested. A proposed sale, assignment or transfer shall be
deemed approved, unless disapproved by the franchisor in the manner
provided by this subdivision. If the proposed sale, assignment, or
transfer is disapproved, the franchisor shall include in the notice
of disapproval a statement setting forth the reasons for the
disapproval.
   (2) In any action in which the franchisor's disapproval of a sale,
assignment or transfer pursuant to this subdivision is an issue, the
reasonability of the franchisor's decision shall be a question of
fact requiring consideration of all existing circumstances. 
   SEC. 8.    The heading of Article 6 (commencing with
Section 20035) of Chapter 5.5 of Division 8 of the  
Business and Professions Code   is amended to read: 

      Article 6.   Offers to Repurchase Inventory 
 Remedies 


   SEC. 9.    Section 20035 of the  Business
and Professions Code   is repealed.  
   20035.  In the event a franchisor terminates or fails to renew a
franchise other than in accordance with the provisions of this
chapter, the franchisor shall offer to repurchase from the franchisee
the franchisee's resalable current inventory meeting the franchisor'
s present standards that is required by the franchise agreement or
commercial practice and held for use or sale in the franchised
business at the lower of the fair wholesale market value or the price
paid by the franchisee. The franchisor shall not be liable for
offering to purchase personalized items which have no value to the
franchisor in the business which it franchises. 
   SEC. 10.    Section 20035 is added to the  
Business and Professions Code   , to read:  
   20035.  In the event a franchisor terminates or fails to allow the
renewal, sale, assignment, or transfer of a franchise other than in
accordance with the provisions of this chapter, the franchisor shall
reinstate the franchisee under the same terms as the existing
franchise agreement and shall pay all damages caused thereby, or at
the election of the franchisee shall pay the franchisee the fair
market value of the franchise and franchise assets. A court may grant
preliminary and permanent injunctions for a violation of this
chapter. 
   SEC. 11.    Section 20036 of the   Business
and Professions Code   is amended to read: 
   20036.  The franchisor may offset against any  repurchase
offer   remedies  made pursuant to Section 20035
any sums owed the franchisor or its subsidiaries by the franchisee
pursuant to the franchise or any ancillary agreement. 
  SECTION 1.    Section 7563 of the Business and
Professions Code is amended to read:
   7563.  The director, in lieu of suspending or revoking a license
issued under this chapter for violations of Sections 7561.1, 7561.3,
and 7561.4, may impose a civil penalty not to exceed one thousand
dollars ($1,000) upon a licensee, if the director determines that
this action better serves the purposes of this chapter. 

  SEC. 2.    This act is an urgency statute
necessary for the immediate preservation of the public peace, health,
or safety within the meaning of Article IV of the Constitution and
shall go into immediate effect. The facts constituting the necessity
are:
   In order to enable the Director of Consumer Affairs to provide
increased protection to consumers from unscrupulous private
investigators at the earliest possible time it is necessary that this
act take effect immediately.