BILL NUMBER: AB 525	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 24, 2015
	AMENDED IN SENATE  AUGUST 17, 2015
	AMENDED IN SENATE  JULY 2, 2015
	AMENDED IN SENATE  JUNE 23, 2015
	AMENDED IN SENATE  JUNE 15, 2015
	AMENDED IN ASSEMBLY  MAY 7, 2015
	AMENDED IN ASSEMBLY  MAY 4, 2015
	AMENDED IN ASSEMBLY  APRIL 6, 2015

INTRODUCED BY   Assembly Members Holden, Atkins, Dodd, and Wilk

                        FEBRUARY 23, 2015

   An act to amend Sections 20020, 20021, 20036, and 20041 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 Section 20035 of, the Business and
Professions Code, relating to franchises.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 525, as amended, Holden. 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 the failure of the
franchisee to substantially comply with the  lawful requirements
of the  franchise agreement  imposed on the franchisee 
after being given notice at least 60 days in advance and would
require that the period for a reasonable opportunity to cure the
failure be no less than 60 days from the date of the notice of
noncompliance. The bill would prohibit the period for curing the
failure from exceeding 75 days, except as specified.
   This bill would make it unlawful for a franchise agreement to
prevent a franchisee from selling or transferring  a franchise,
 all or substantially all of the assets of the franchise
 business   business,  as defined, or a
controlling or noncontrolling interest in the franchise business, to
another person, provided that the person is qualified under the
franchisor's then-existing and reasonable standards for approval of
new  or renewing  franchisees, as  specified.
  specified, and the parties comply with specified
transfer provisions.  The bill would prohibit a sale, transfer,
or assignment  if   of  a franchise, 
all  or substantially all of the assets  of a franchise
business,  or a controlling or noncontrolling interest in the
franchise business, without the franchisor's written consent, but
would prohibit that consent from being withheld unless the buyer,
transferee, or assignor does not meet standards for new 
franchisees.  or renewing franchisees or the parties
fail to meet specified transfer provisions. 
   This bill would require the franchisee, prior to the sale,
assignment, or transfer of  a franchise,  all or
substantially all of the assets of  the   a
 franchise business, as defined, or a controlling or
noncontrolling interest in the franchise business, to another person,
to notify the franchisor of the franchisee's intent to sell,
transfer, or assign the franchise or its assets or interest, as
specified, and would require the notice to be in writing and include
specified information. The bill would require the franchisor, within
a specified period, to notify the franchisee of the approval or
disapproval of the  proposed  sale, assignment, or transfer
of the franchise, and would require the notice to be in writing and
be delivered by courier to the franchisee or sent by receipted mail.
 The bill would require the franchisor to communicate the
franchisor's standards for approval of new or renewing franchisees,
as specified.  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 repeal those provisions and would, with certain
exceptions, require the franchisor, upon a lawful termination or
nonrenewal of a franchisee, to  compensate  
purchase from  the franchisee at the value of price paid, minus
depreciation,  for  all inventory, supplies,
equipment, fixtures, and furnishings purchased or paid for under the
franchise agreement, as specified.  The bill would not require a
franchisor to purchase assets to which the franchisee cannot or does
not provide clear title and possession. 
   This bill would  prescribe specified remedies that may be
elected by   entitle  a franchisee  to receive
from the franchisor the fair market value of the franchise business
and assets, as well as resulting damages,  if a franchisor
terminates or fails to renew a franchise in violation of the act.
 The bill would entitle a franchisee to be reinstated under
the same terms as the existing franchise agreement, in addition to an
award for damages or, at the request of the franchisee, if
reinstatement is impossible or impracticable, as determined by the
trier of fact, would require the franchisor to pay the franchisee the
fair market value of the franchise and franchise assets and any
other damages, as provided.  The bill would provide for
injunctive relief in the event of a violation or threatened violation
of these provisions.
    The bill would limit its application to a franchise agreement
entered into or renewed on or after January 1, 2016, or to franchises
of an indefinite duration that may be terminated without cause.
   Vote: 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   Except as
provided in Section 20021, good  cause shall be limited to the
failure of the franchisee to substantially comply with the 
lawful requirements imposed upon the franchisee by the 
franchise agreement after being given notice at least 60 days in
advance of the termination and a reasonable opportunity, which in no
event shall be less than 60 days from the date of the notice of
noncompliance, to cure the failure. The period to exercise the right
to cure shall not exceed 75 days unless there is a separate agreement
between the franchisor and franchisee to extend the time.
  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, 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. 
   (l) If the franchise expressly permits termination under such
circumstances, there is a lawful termination or nonrenewal of a
separate motor fuel franchise governed by provisions of the Petroleum
Marketing Practices Act (15 U.S.C. Secs. 2801 to 2807, inclusive)
that is operated by the franchisee or affiliate of the franchisee
located at the same business premises if both franchises are granted
by the same franchisor or an affiliate of the franchisor. "Affiliate"
shall have the same meaning as set forth in subdivision (k) of
Section 31005.5 of the Corporations Code. 
  SEC. 3.  Section 20022 is added to the Business and Professions
Code, to read:
   20022.  (a)  Upon   Except as provided in
this section, upon  a lawful termination or nonrenewal of a
franchisee, the franchisor shall  compensate  
purchase from  the franchisee, at the value of price paid, minus
depreciation,  for  all inventory, supplies,
equipment, fixtures, and furnishings purchased or paid for under the
terms of the franchise agreement or any ancillary or collateral
agreement by the franchisee to the franchisor or its approved
suppliers and sources,  that,   that are, 
at the time of the notice of termination or nonrenewal,  are
 in  the possession of the franchisee or used 
by the franchisee  in the franchise business.  The
franchisor shall have the right to receive clear title to and
possession of all items purchased from the franchisee under this
section. 
   (b) This section shall not require the franchisor to purchase any
personalized items, inventory, supplies, equipment, fixtures, or
furnishings not reasonably required to conduct the operation of the
franchise business in accordance with the franchise agreement or any
ancillary or collateral  agreement.   agreement
or to which the franchisee, at the cessation of op   eration
of the franchise business by the franchisee, cannot lawfully, or
does not, grant the franchisor clear title and possession upon the
franchisor's payment to the franchisee for the inventory,  
supplies, equipment, fixtures, or furnishings. 
   (c) This section shall not apply when the franchisee declines a
bona fide offer of renewal from the franchisor.
   (d) This section shall not apply if the  franchisor does not
prevent the  franchisee  retains   from
retaining  control of the principal place of the franchise
business.
   (e) This section shall not apply to any termination or nonrenewal
of a franchise due to a publicly announced and nondiscriminatory
decision by the franchisor to completely withdraw from all franchise
activity within the relevant geographic market area in which the
franchise is located. For the purpose of this section "relevant
geographic market area" shall have the same meaning as in Section
20999. 
   (f) This section shall not apply if the franchisor and franchisee
mutually agree in writing to terminate or not renew the franchise.
 
   (f) 
    (g)  This section shall not apply to any inventory,
supplies, equipment, fixtures, or furnishings that are sold by the
franchisee between the date of the notice of termination or
nonrenewal, and the cessation of operation of the franchise business,
by the franchisee, pursuant to the termination or nonrenewal.

   (g) 
    (h)  Upon the termination  or nonrenewal  of a
franchise, a franchisor may offset against  the  amounts
owed to a franchisee under this section any amounts owed by 
such   the  franchisee to the franchisor.
  SEC. 4.  Section 20028 is added to the Business and Professions
Code, to read:
   20028.  (a) It is unlawful for a franchisor to prevent a
franchisee from selling or transferring  a franchise,  all
or substantially all of the assets of the franchise business, or a
controlling or noncontrolling interest in the franchise business, to
another person provided that the person is qualified under the
franchisor's then-existing  and reasonable standards, as
  standards for the approval of new or renewing
franchisees, these standards to be made available to the franchisee,
as provided in Section   20029, and to be  consistently
applied to similarly situated franchisees operating within the
franchise  brand, for the approval of new or renewing
franchisees.   brand, and the franchisee and the buyer,
transferee, or assignee comply with the transfer conditions specified
in the franchise agreement. 
   (b) Notwithstanding subdivision (a), a franchisee shall not have
the right to sell, transfer, or assign the  franchise
  franchise, all  or substantially all of the
assets of the franchise business, or a controlling or noncontrolling
interest in the franchise business, without the written consent of
the franchisor, except that the consent shall not be withheld unless
the buyer, transferee, or  assignor   assignee
 does not meet the standards for new or renewing franchisees
described in subdivision  (a).   (a) or the
franchisee and the buyer, transferee, or assignee do not comply with
the transfer conditions specified in the franchise agreement. 
   (c)  Nothing in this section shall   This
  section does not  prohibit a franchisor from
exercising the contractual right of first refusal to purchase a
 franchise   franchise, all or substantially all
of the assets of a franchise business, or a controlling or
noncontrolling interest in a franchise business  after receipt
of a bona fide offer  from a proposed purchaser  to purchase
the  franchise by a proposed purchaser of the franchise.
  franchise, assets, or interest.  A franchisor
exercising the contractual right of first refusal shall offer the
 franchisee   seller  payment at least
equal to the value offered in the bona fide offer.
   (d) For the purpose of this section "franchise business" shall
include a legal entity that is a party to a franchise agreement.
  SEC. 5.  Section 20029 is added to the Business and Professions
Code, to read:
   20029.  (a) The franchisee shall, prior to the sale, assignment,
or transfer of  a franchise,  all or substantially all of
the assets of  the   a  franchise business,
or a controlling or noncontrolling interest in the franchise
business, to another person, notify the franchisor, of the franchisee'
s intent to sell, transfer, or assign the  franchise
  franchise, all  or substantially all of the
assets of the franchise business, or  a   the
 controlling or noncontrolling interest in the franchise
business. The notice shall be in writing, delivered to the franchisor
by business courier or by receipted mail 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. 
 franchise, the assets of the franchise business, or the
interest in the franchise business. 
   (3) The proposed transferee's application for approval to become
the successor franchisee. The application shall include all forms,
financial disclosures, and related information generally utilized by
the franchisor in reviewing prospective new franchisees, if those
forms are readily made available to the existing franchisee. If the
forms are not readily available, the franchisee shall request and the
franchisor shall deliver the forms to the franchisee by business
courier or receipted mail within 15 calendar days. 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 or
documentation necessary to complete the transfer application.  If
the franchisor's then-existing standards for the approval of new or
renewing franchisees are not readily available to the franchisee when
the franchisee notifies the franchisor of the franchisee's intent to
sell, transfer, or assign the franchise, the assets of the franchise
business, or the controlling or noncontrolling interest in the
franchise business, the franchisor shall communicate the standards to
the franchisee within 15 calendar days. 
   (b) (1) The franchisor shall, within 60 days after the receipt of
all of the necessary information and documentation required pursuant
to subdivision (a), or as specified by written agreement between the
franchisor and the franchisee, notify the franchisee of the approval
or disapproval of the proposed sale, assignment, or  transfer
of the franchise.   transfer.  The notice shall be
in writing and shall be delivered to the franchisee by business
courier or receipted mail. 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 reasonableness of the franchisor's decision shall be a question
of fact requiring consideration of all existing circumstances. For
purposes of this paragraph, the finder of fact may be an arbitrator
specified in the franchise agreement and who satisfies the
requirements of Section 20040. Nothing in this paragraph shall
prohibit summary judgment when the reasonableness of transfer
approval or disapproval can be decided as a matter of law.
   (3)  Nothing in this subdivision requires  
This section does not require  a franchisor to exercise a
contractual right of first refusal.
   (c)  Nothing in this section shall   This
section does not  prohibit a franchisor from exercising the
contractual right of first refusal to purchase a  franchise
  franchise, all or substantially all of the assets of a
franchise business, or a controlling or noncontrolling interest in a
franchise business  after receipt of a bona fide offer 
to purchase the franchise by  from  a proposed
purchaser  of the franchise.   to purchase the
franchise, assets, or interest.  Any franchisor exercising the
contractual right of first refusal shall offer the 
franchisee   seller  payment at least equal to the
value offered in the bona fide offer.
   (d) For the purpose of this section "franchise business" shall
include a legal entity that is a party to a franchise agreement.
  SEC. 6.  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.  Remedies


  SEC. 7.  Section 20035 of the Business and Professions Code is
repealed.
  SEC. 8.  Section 20035 is added to the Business and Professions
Code, to read:
   20035.  (a) In the event a franchisor terminates or fails to renew
a franchisee, in violation of this chapter, the franchisee shall be
entitled to  either of the following remedies:  
receive from the franchisor the fair market value of the franchised
business and franchise assets and any other damages caused by the
violation of this chapter.  
   (1) Reinstatement of the franchisee under the same terms as the
existing franchise agreement, and the franchisor shall pay all
damages caused to the franchisee from the violation. 

   (2) Upon request of the franchisee, or if the relief in paragraph
(1) is determined by the finder of fact to be impossible or
impracticable, then the franchisor shall pay the franchisee the fair
market value of the franchise and franchise assets and any other
damages caused by the violation of this chapter. 
   (b) A court may grant preliminary and permanent injunctions for a
violation or threatened violation of this chapter.
  SEC. 9.  Section 20036 of the Business and Professions Code is
amended to read:
   20036.  The franchisor may offset against any remedies made
pursuant to Section 20035 any prior recovery by the franchisee
pursuant to Section 20022 and any sums owed the franchisor or its
subsidiaries by the franchisee pursuant to the franchise or any
ancillary agreement.
  SEC. 10.  Section 20041 of the Business and Professions Code is
amended to read:
   20041.  (a) Except as provided in subdivision (b), the provisions
of this chapter shall apply only to franchises granted or renewed on
or after January 1, 1981, or to franchises of an indefinite duration
that may be terminated by the franchisee or franchisor without cause.

   (b) The amendments to this chapter made by the act adding this
subdivision shall apply only to franchise agreements entered into or
renewed on or after January 1, 2016, or to franchises of an
indefinite duration that may be terminated by the franchisee or
franchisor without cause.