BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 525 Hearing Date: June 29,
2015
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|Author: |Holden |
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|Version: |June 23, 2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant|Bill Gage/Mark Mendoza |
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Subject: Franchise relations: renewal and termination
SUMMARY: Revises the rights and responsibilities of franchisors and
franchisees, as currently specified in the California Franchise
Relations Act, as to the termination of a franchise agreement,
compensation to the franchisee pursuant to a termination or
nonrenewal of the franchise agreement, the sale, transfer or
assignment of a franchise by the franchisee and remedies
provided for violation of the Act, and makes other minor and
clarifying changes.
Existing law:
1)Establishes the California Franchise Relations Act (CFRA)
which governs the renewal, termination, transfer, and all
other conditions and provisions made pursuant to franchise
agreements. (BPC § 20000 et seq.)
2)Defines a franchise as a contract or agreement, either
expressed or implied, whether oral or written, between two or
more persons by which:
a) A franchisee is granted the right to offer, sell or
distribute goods or services under the plan or system of
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the franchisor;
b) Operation of the business is substantially associated
with franchisor's trademark, advertising or other symbol;
and,
c) A franchise fee, as defined, is paid by the franchisee.
(Business & Professions Code (BPC) § 20001 (a), (b) and (c))
3)Excludes from the definition of a franchise those governed by
the Petroleum Marketing Practices Act, lease departments,
licenses, or concessions at or with a general merchandise
retail establishment, and a cooperatively operated nonprofit
organization. (BPC § 20001 (d))
4)Specifies that a "franchisee" is a person to whom a franchise
is granted and a "franchisor" is a person who grants or has
granted a franchise. (BPC § 20002, § 2003)
5)Provides that any condition, stipulation, or provision waiving
compliance with the CFRA is contrary to public policy and
void. (BPC § 20010)
6)Establishes that the provisions under the CFRA apply to any
franchise where either the franchisee is domiciled in this
state or the franchised business is or has been operated in
this state. (BPC § 20015)
7)Prohibits termination of a franchise agreement prior to the
end of the term, except for good cause which includes failure
to comply with any lawful requirement of the franchise
agreement after written notice and a reasonable opportunity
(no more than 30 days) to cure the failure. (BPC § 20020)
8)Authorizes the immediate termination of a franchise agreement
without notice or an opportunity to cure in cases of
bankruptcy, abandonment, mutual agreement, material
misrepresentation; failure to comply with any federal or local
law applicable to the operation of the franchise; repeated
noncompliance after cure; seizure of the premises by a
governmental entity or creditor; conviction of a felony or
relevant misdemeanor; failure to pay franchisee fees within
five days of overdue notice; and imminent danger to public
health or safety. (BPC § 20021)
AB 525 (Holden) Page 3
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9)Requires a franchisor to notify the franchisee of its
intention not to renew a contract at least 180 days prior to
the expiration of the franchise under specified circumstances,
during which time the franchisee may attempt to find a
purchaser acceptable to the franchisor that meets their
current requirements regarding new franchises or for renewal
franchises. Provides that nothing shall prohibit a franchisor
from exercising a right of first refusal to purchase the
franchisees business.
(BPC § 20025)
10)Provides that no franchisor shall deny the surviving spouse,
heirs, or estate of a deceased franchisee or the majority of
shareholder of the franchisee the opportunity to participate
in the ownership of the franchise under specified conditions.
(BPC § 20027)
11)Requires a franchisor that terminates or fails to renew a
franchise without complying with the CFRA to offer to
repurchase the franchisee's resalable current inventory at the
lower of the fair wholesale market value or the price paid by
the franchisee. (BPC § 20035)
12)Provides that the franchisor may offset against any
repurchase offer made pursuant to Item #11 above, any sums
owed the franchisor or its subsidiaries by the franchisee
pursuant to the franchise or any ancillary agreement. (BPC §
20036)
13)Provides that nothing under the CFRA shall limit the right of
a franchisor and franchisee to agree before or after a dispute
has arisen to binding arbitration of claims under the CFRA, as
specified. (BPC § 20040)
14)Defines "relevant geographic market area" as this state or a
standard metropolitan statistical area within this state which
has been established by the United States office of Management
and Budget. (BPC § 20999)
15)Establishes a Franchises Act and the Franchise Dealers Fair
Practices law - which governs franchise relationships and
contracts between a refiner and a distributor, between a
refiner and retailer, between a distributor and another
distributor, or between a distributor and a retailer for the
sale, consignment, or distribution of gasoline, diesel, etc.
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(BPC § 20999 et seq. and BPC § 21140 et seq.)
16)Establishes the California Franchise Investment Law (CFIL) -
which governs financial disclosures and registration
requirements with the Department of Business Oversight.
(Corporations Code (CORP) § 31000 et seq.)
17)Makes it a violation of the CFIL for any franchisor, directly
or indirectly, through any officer, agent or employee, to
restrict or inhibit the right of franchisees to join a trade
association or to prohibit the right of free association among
franchisees for any lawful purposes. (CORP § 31220)
18)Provides that any person who offers or sells a franchise in
violation of specified sections of the CFIL, or in violation
of any provision that provides an exemption from the
requirements of the CFIL, as specified, shall be liable to the
franchisee or sub-franchisor, who may sue for damages caused
thereby, and if the violation is willful, the franchisee may
also sue for rescission, unless, in specified cases, the
defendant proves that the plaintiff knew the facts concerning
the untruth or omission, or that the defendant exercised
reasonable care and did not know, or, if he or she had
exercised reasonable care, would not have known, of the
untruth or omission. (CORP § 31300)
19)Allows any person who violates the right to free association
to be sued in the superior court in the county in which the
defendant resides or where a franchise affected by the
violation does business, for temporary and permanent
injunctive relief and for damages, if any, and the costs of
suit, including reasonable attorneys' fees. Further provides
that a plaintiff shall not be required to allege or prove that
actual damages have been suffered in order to obtain
injunctive relief.
(CORP § 31302.5)
20)Prohibits an action from being maintained to enforce any
liability for violation of the right of free association
unless it is brought within two years after the violation upon
which it is based or within one year after the discovery by
the plaintiff of the facts constituting such violation,
whichever occurs first. (CORP § 31302.5)
21)Except as explicitly provided, prohibits civil liability in
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favor of any private party against any person by implication
from or as a result of the violation of any provision of CFIL
or any rule or order thereunder. (CORP § 31306)
This bill:
1)Provides that no franchisor may terminate a franchise prior to
the expiration of its term except for good cause, but that
good cause shall be limited to the failure of the franchisee
to substantially comply with the franchise agreement and that
the franchisee must be given notice at least 60 days (rather
than the current 30 days or less) in advance of the
termination to cure the failure.
2)Specifies that one of the reasons for an immediate notice of
termination of the franchise without an opportunity to cure,
is if 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.
3)Requires a franchisor, upon termination or nonrenewal of a
franchise, to compensate the franchisee at the value of price
paid minus depreciation, of all inventory, supplies,
equipment, fixtures, and furnishings purchased or paid for by
the franchisee from the franchisor or its approved suppliers
and sources under the terms of the franchise agreement or any
ancillary or collateral agreement, and, at the time of the
notice of termination or nonrenewal, are in possession of the
franchisee or currently used in the franchise business.
4)Provides that a franchisor is not required 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.
5)Provides that the franchisor is not required to compensate the
franchisee as specified, when the franchisee declines a bona
fide offer of renewal from the franchisor or if the franchisee
is to retain control of the principal place of the franchise
business.
6)Provides that franchisor is not required to compensate the
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franchisee as specified, if termination or nonrenewal of a
franchisee is due to publically announced and
non-discriminatory 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 BPC § 20999 (p).
7)Provides that the franchisor does not have to compensate the
franchisee for any inventory, supplies, equipment, fixtures,
or furnishings that are sold by the franchisee between the
date of the notice of termination or renewal, and the
cessation of operation of the franchise business, by the
franchisee, pursuant to the termination or nonrenewal.
8)Provides that, upon termination of a franchise, a franchisor
may offset amounts owed to a franchisee by any amounts owed by
such franchisee to the franchisor.
9)Deems it unlawful for a franchisor to prevent a franchisee
from selling or transferring all of substantially all of the
assets of the franchise business, or a controlling interest in
the franchise business, to another person provided that the
person is qualified under the franchisor's then-existing and
reasonable standards, as consistently applied to similarly
situated franchisees operating within the franchise brand, for
the approval of new or renewed franchisees.
10)Provides that a franchisee does not have the right to sell
transfer, or assign the franchise or substantially all of the
assets of the franchise business, or a controlling 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 is not qualified
under the franchisor's then-existing and reasonable standards
for the approval of new or renewed franchisees.
11)Provides that nothing shall prohibit a franchisor from
exercising the right of first refusal to purchase a franchise
after receipt of a bona fide offer to purchase the franchise
by a proposed purchaser of the franchise; additionally
provides that any franchisor exercising the right of first
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refusal must offer the franchisee payment at least equal to
the value offered in the bona fide offer.
12)Specifies that pursuant to the provisions that permit the
sale, transfer or assignment of a franchise business by the
franchisee, that "franchise business" shall include a legal
entity that is a party to a franchise agreement.
13)Requires 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 intent to sell, transfer, or assign the franchise
or substantially all of the assets of the franchise business,
or a controlling interest in the franchise business, as
specified.
14)Requires the franchisor to notify the franchisee of the
approval or disapproval of the sale, assignment, or transfer
of the franchise within 60 days, as specified.
15)Provides that a proposed sale, assignment or transfer shall
be deemed approved, unless disapproved by the franchisor by
providing notice as specified and 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.
16)Provides that in any action in which the franchisor's
disapproval of a sale, assignment or transfer is an issue, the
reasonableness of the franchisor's decision shall be a
question of fact requiring consideration of all circumstances
and that the finder of fact may be an arbitrator as specified
in the franchise agreement and satisfies the requirements of
BPC § 20040. Provides however that nothing shall prohibit
summary judgment when the reasonableness of transfer approval
or disapproval can be decided as a matter of law.
17)Provides that a franchisor is not required to exercise a
right of first refusal pursuant to the sale, assignment, or
transfer of the franchised business, but that nothing shall
prohibit a franchisor from exercising the right of first
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refusal to purchase a franchise after receipt of a bona fide
offer to purchase the franchise by a proposed purchaser of the
franchise, however, any franchisor exercising the right of
first refusal must offer the franchisee payment at least equal
to the value offered in the bona fide offer.
18)Provides that in the event a franchisor terminates or fails
to renew a franchisee in violation of provisions of the CFRA ,
the franchisee shall be entitled to either of the following
remedies:
a) Reinstatement of the franchisee under the same terms as
the existing franchise agreement, and the franchisor shall
pay all the damages caused to the franchisee from the
violation.
b) Upon request of the franchisee, or if the relief
provided above (reinstatement) 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 franchisee assets and any other
damages caused by the violation of the CFRA.
c) A court may grant preliminary and permanent injunctions
for a violation or threatened violation of the CFRA.
19)Provides that the franchisor may offset against any remedies
made pursuant to
Item #18 above, any prior recovery by the franchisee made as to
compensation for their inventory, supplies, etc. and any sums
owed the franchisor or its subsidiaries by the franchisee
pursuant to the franchise or any ancillary agreement.
20)Makes other technical and clarifying changes.
FISCAL
EFFECT: None. This bill is not keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1.Purpose. This bill is sponsored by the Coalition of Franchisee
Associations .
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According to the Author, the California Franchise Relations Act
provides franchisee's fewer rights than nearly every other
form of contract law in California, especially as it pertains
to termination, breach and damages. Franchise agreements are
frequently one-sided contracts that strongly favor the
franchisor over the small business owners who operate
franchises. Unlike traditional small businesses, most
franchises reflect a profound imbalance of contractual power
that favors the franchisor and places franchisees in a
financially precarious situation. "AB 525 restores fairness
to franchise agreements by applying traditional contract law
standards, giving franchisees the right to transfer the
business, ensuring franchisees can recover their [investment]
when a franchise relationship end[s], all while protecting the
franchisor's rights to terminate the worst actors, including
those who break laws, cannot make required payments or operate
in direct defiance of the contract terms."
The Author further states that, "The current franchise relations
act has allowed franchisors to use unethical practices against
franchisees. These practices are used to terminate a franchise
agreement which effectively takes the franchisees business
away from them. This is evidenced in multiple lawsuits
throughout the country involving franchisors that engage in
'churning.' Recent whistleblower lawsuits have exposed
franchisors engaging in this churning process whereby
franchisors file questionable violation reports against
franchisees in order to generate 'good cause,' a one-sided
contractual standard, to 'take back' the business. Once the
business is returned to corporate control, the business is
sold to a new franchisee for higher franchise fees. Good
cause is a legal standard rarely used in contract law. Even if
a franchisor is in the wrong, franchisees are severely limited
in the equity or damages they can recover- frequently leaving
many franchisees penniless."
2. The Franchise Business. Franchised businesses represent a
large and growing segment of the nation's businesses, making
up almost 11 percent of businesses with employees, employing
an estimated 9.1 million people, and consistently adding jobs
faster than non-franchised businesses in recent years.
According to the International Franchise Association (IFA),
21 percent of franchisees nationally are minority owned
businesses, while there are 14 percent of minority
non-franchised small business ownerships. Also, a higher
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proportion of Asian Americans and African Americans are in
franchised business than non-franchised business, and a
similar proportion of Latinos are in franchised and
non-franchised business. In
California, over 83,000 franchised establishments employ more
than 925,700 workers. Fast food restaurants are the biggest
employers in the franchise sector.
Franchises are a popular and potentially lucrative way for
people to open their own business. Just like any other small
business owner, franchisees invest a large amount of their
own money in the business and continue to pay for upgrades
and changes in response to the market. Also like independent
business owners, they often work long days and nights
handling operations, managing employees and overseeing
expenses. According to the Author, "they are the
accountants, human resource managers, office managers, and
employees of these businesses. Franchise owners invest so
much of their time, money and energy into these businesses
because the business is their livelihood for today and
security in the future."
The advantage of owning a franchise over an independent
business is the name brand recognition and the support of the
corporation. Franchise owners rely on the trusted name brand
of their products to drive sales. Reliably providing the
well-known product or service makes their business
successful. It can also lead to ownership of more
franchises.
The franchise agreement contract is the central authority for
the relationship between the franchisor and franchisee, which
can be hundreds of pages long and contains a highly detailed
description of the rights, responsibilities and remedies of
the parties. The franchisee must sign the contract promising
to comply with all of the requirements and the franchisor's
service and marketing directives now and in the future.
According to the International Franchise Association, a
"franchise is the agreement or license between two legally
independent parties which gives a person or group of people
(the franchisee) the right to market a product or service
using the trademark or trade name of another business (the
franchisor)." It also gives the franchisee the right to
market a product or service using the operating methods of
the franchisor and the obligation to pay the franchisor fees
for those rights. The franchisor has the obligation to
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provide those rights and support the franchisee according to
their agreement. More specifically, franchisees serve to
provide the look, name recognition, and brand of the
business. The franchisee builds the brand locally and
develops good will within the community. The franchisee's
business success helps support the community with taxes and
other contributions as well as improves the bottom line for
franchisors.
3.Current Law Regulating the Franchisor-Franchisee Relationship.
A substantial part of California franchise law is largely
embodied in California Franchise Investment Law (CFIL) and
California Franchise Relations Act (CFRA), although certain
specific industries (i.e., auto dealers and gas stations) have
their own unique provisions as well.
Under the Corporations Code, CFIL was enacted in 1970 to
regulate franchise investment opportunities in order to
protect California investors from potentially fraudulent
franchise investments. CFIL generally requires franchisors
to disclose to prospective franchisees the information
necessary to make an informed decision about franchise
offers, and prohibits the sale of franchises that would lead
to fraud or the likelihood that a franchisor's promises would
not be fulfilled. CFIL contains explicit provisions for
enforcement generally through damages (payment for economic
losses) and rescission (cancellation of the contract). It
also provides for injunctive relief (to require or prohibit a
specific action), and reasonable costs and attorneys' fees in
certain circumstances.
CFRA (which excludes petroleum-related franchises, like gas
stations) was enacted in 1980 to govern relationships between
franchisors and franchisees after they have entered into
contract with each other. CFRA is designed to prevent unfair
practices in the transfer, renewal, or termination of a
franchise. CFRA prohibits termination of a franchise
agreement except for good cause and only after notice and an
opportunity to fix the problem. It also lays out certain
circumstances where immediate termination is permitted, for
example: bankruptcy, abandonment, mutual agreement, material
misrepresentation, illegal activity, noncompliance with the
franchise agreement, failure to pay franchise fees, and
imminent danger to the public. CFRA prohibits nonrenewal of
a franchise agreement without 180 days prior notice, and with
certain additional protections for the franchisee. It also
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provides for the transfer of ownership to surviving spouses
or heirs. CFRA does not contain explicit provisions to
compensate a franchisee for the nonrenewal or termination of
a franchise, except for the buyback of inventory when a
franchise is improperly terminated or nonrenewed, although
general contract remedies may still be available.
4.The Imbalance in Bargaining Power between Franchisors and
Franchisees. Supporters of this bill argue that there is both
a systemic problem (a basic imbalance in bargaining power
between the franchisor and the franchisee), and a host of
specific abuses of that power which make this bill necessary.
An oft-cited 1996 court decision by the California Court of
Appeal (2nd Dist.) describes the franchise dynamic this way:
The relationship between franchisor and franchisee is
characterized by a prevailing, although not universal,
inequality of economic resources between the contracting
parties. Franchisees typically, but not always, are small
businessmen or businesswomen or people seeking to make the
transition from being wage earners and for whom the franchise is
their very first business. Franchisors typically, but not
always, are large corporations. The agreements themselves tend
to reflect this gross bargaining disparity. Usually they are
form contracts the franchisor prepared and offered to
franchisees on a take-it-or-leave-it basis. (Emerson,
Franchising and the Collective Rights of Franchisees (1990) 43 V
and L. Rev. 1503, 1509 & fn. 21.)?Some courts and commentators
have stressed the bargaining disparity between franchisors and
franchisees is so great that franchise agreements exhibit many
of the attributes of an adhesion contract and some of the terms
of those contracts may be unconscionable. "Franchising involves
the unequal bargaining power of franchisors and franchisees and
therefore carries within itself the seeds of abuse. Before the
relationship is established, abuse in threatened by the
franchisor's use of contracts of adhesion presented on a
take-it-or-leave-it basis. Indeed such contracts are sometimes
so one-sided, with all the obligations on the franchisee
and none on the franchisor, as not to be legally enforceable.
(Postal Instant Press v. Sealy, 43 Cal. App. 4th 1704, 1715-1717
(1996.))
As indicated by the proponents, franchising in California
today is still characterized by increasingly one-sided and
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non-negotiable franchise agreements. What may be worse,
according to proponents, is that franchisees cannot easily
close down even a money-losing franchise. With zero cash
flow, the franchisee cannot pay rents, loans, employees, or
other obligations. Indeed, many franchise agreements are
written so that failed franchisees are required to continue
to pay the franchisor royalties for the balance of the
franchise term, even if there is no franchise generating
income. Franchisees thus become indentured servants to the
franchisor. At least by keeping the business open, there is
some money to cover or partially cover these expenses. The
franchisee become literally trapped in a downward spiral and
cannot close the business. Unfortunately, this happens
repeatedly in franchising as pointed out by proponents. When
the funds completely run out the only remaining recourse may
be bankruptcy.
The Small Business Administration has lending programs for
individuals seeking to buy franchises. A published report,
however, found dozens of franchise systems with over fifty
percent of franchisees with loans failing to pay back their
loan obligations and some systems have loan failure rates
over ninety percent as noted in the report. Veterans have
also been targeted through the use of SBA loans to own and
operate a franchise and are experiencing high failure rates
as well with particular franchises. VetFran, a program
sponsored by the IFA, has worked to make franchise ownership
and employment more accessible to veterans since 1991.
According to VetFran, veterans own approximately 66,000
franchise businesses, and since 2011, over 5,600 veterans
have become franchise business owners since 2011, and 65
percent of franchisors report an increase in the number of
veterans being recruited over just the last 12 months.
Proponents point out, however, that there are certain
franchises which have had a higher than normal risk of
failure for veterans even though they are listed as by
VetFran directory as one of its "premium veteran
franchisors." AAMCO Transmissions, for example, has a 23.8
percent SBA loan failure rate, Meineke Car Care Center has a
22.2 percent failure rate, Huntington Learning Center has a
30.8 percent, and Matco Tools has a 33.4 percent failure rate
on SBA loans. Veterans have actually accused Matco Tools of
aggressively recruiting and falsely representing the business
opportunity and have online petitions and urged Matco Tools
in other social media to "stop selling fraudulent franchises
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to our troops."
As indicated, the CFRA was enacted over thirty years ago as
one of the first state statutes to address the franchise
relationship and partially limit terminations and
nonrenewals. But even then, franchisees were opposed to the
bill ( AB 295 , Chapter 1355, Statutes of 1980) to implement
the CFRA and argued that while the original intent of
creating the CFRA was to cure the widespread abuses in the
termination and nonrenewal of franchises, it instead
basically sanctioned many of those abuses in law. They
stated, [We] cannot describe how distressed franchisees
throughout the State of California are over the fact that
this bill is no longer in their best interests but is, in
reality a franchisor bill." Proponents argue that it has
been proven over time that the statutory provisions which
were intended to protect franchisees are not strong enough
and the remedies provided are limited. Other states
including Arkansas, Hawaii, Indiana, Iowa, Nebraska, New
Jersey, Rhode Island, Washington and Wisconsin have enacted
stronger provisions for franchisees to prohibit unfair
practice in the franchise relationship and to address
franchisors who unfairly terminate, fail to renew, block
transfers, or adequately compensate franchisees for their
investment in the business.
5.Recent Survey of Franchisees Satisfaction and Relationship
with Franchisors. A recent survey was conducted in 2015 by
an organization called, "FranchiseGrade.com." The purpose of
the survey was to develop and conduct a survey of franchisees,
and various dimensions related to their satisfaction [in the
franchise business]. Some of the topics covered in the survey
included satisfaction with the franchise business, level of
work and business experience, degree of investment due
diligence, types of financing and assets pledged, relationship
with franchisor, and economic success. The survey sample was
drawn from a list of
282,809 unique franchisees nationally, and 39,681 in California
and the target population were those that had been in a
franchise business for one year or more.
According to the survey, 72% of franchisees are in the 40 to 60
age range, 77% are male, 68% have a community college or
four-year degree, a majority of franchisees have been in
business over 5 years and 66% have only one franchise
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business. This survey seems to indicate that many franchisees
in California are dissatisfied with their franchises because
they have invested a lot into their business, but are not
receiving the benefits they expected. Approximately 46% said
they were dissatisfied or very dissatisfied as a franchisee
and 65% said they would not recommend franchising to a family
member. Meanwhile only 28% said they were satisfied. Many had
little experience owning a business initially, but they
indicate that they did their research before purchasing: 85%
spoke to a franchisee and 72% had an attorney review the
franchise agreement before signing it. Although franchisors'
representatives provided revenue and profit projections, only
13% said they also received a clear estimate of how much they
would need to spend on major improvements.
The survey also indicates that after deciding to invest their
time and energy into a new business, franchisees also invested
heavily financially. Approximately 74% took out a loan, 34%
of those were SBA loans and 49% pledged their home as an asset
to purchase the franchise. After establishing the franchise,
the large, mandatory financial investments continued. About
50% have been required to make major capital improvements and
only 33% of them believe it improved their business. Another
78% say there have been mandatory changes to the business
model that increased their costs, but not increased revenue,
and 73% said there has been an increase in mandatory fees.
There is a possibility that these required changes to the
business model can cause a franchisee to be terminated for
noncompliance, and many of them have been warned accordingly.
Approximately 82% said they have been warned that a failed
inspection can lead to termination or nonrenewal.
Finally, only 22% say they can earn a decent living from their
franchise, and 79% pull a salary of less than $50,000 from
their business. The survey also asked
franchisees about transfers and 48% say that they cannot sell
their business for a fair price and only 30% believe they can.
6.Requirements and Remedies Provided in this Measure Attempt to
Level the Playing Field Between Franchisee and Franchisor.
Supporters argue that this bill provides significant new
remedies for franchisees from unfair terminations and
nonrenewals of their franchises by the franchisor, adequate
compensation to the franchisee upon termination or nonrenewal
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of their franchise business, and protection of their rights to
sell, assign or transfer their franchise business. The
following describes existing law and the changes proposed and
the responses of the Author, proponents and opponents to these
changes:
a) Substantial compliance standard applied to termination
and renewal.
BPC Section 20020 currently allows premature termination of a
franchise agreement for good cause, which includes failure
to comply with any lawful requirement of the franchise
agreement after written notice and a reasonable opportunity
to comply with the agreement within at least 30 days.
Section 20025 allows the franchisor to not renew a
franchise agreement simply by providing the franchisee with
180 days written notice of its intent not to renew.
According to the Author, these standards unfortunately
allow some franchisors to unfairly take advantage of
franchisees by using the contract to punish franchisees by
taking their business away and to avoid their legal
obligations to give franchisees another chance.
Accordingly, this bill would allow termination of franchise
agreement for good cause only upon the failure of the
franchisee to substantially comply with the franchise
agreement, and give the franchisee advance notice and an
opportunity of at least 60 days to comply. According to
the Author, this provision ensures fairness to franchisees
by barring the termination of any franchisee that is in
substantial compliance with the franchise agreement,
instead of allowing termination much more broadly for
failure to comply, in the case of terminations, "with any
lawful requirement of the franchise agreement."
Proponents of the bill argue that the "substantial
compliance" legal standard reduces ambiguity in terms of
the franchise agreement because the term is well-defined,
historically accepted, and is a central tenet of contract
law used by many other states to regulate franchise
agreements and contracts, generally. They note that
California courts have been interpreting substantial
performance of contracts dating back to at least the early
1900s (see, e.g., Thomas Haverty Co. v. Jones, 185 Cal. 285
AB 525 (Holden) Page 17
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(1921), holding that substantial performance was achieved
when the non-breaching party still "is enjoying the fruits
of the . . . work in performance of the contract.")
Proponents also note that current California jury
instructions provide for a simple two-part test to
determine the existence of substantial performance. First,
the breaching party must show they "made a good faith
effort to comply with the contract," and second, "[the
non-breaching party] received essentially what the contract
called for because?failures, if any, were so trivial that
they could have been easily fixed or paid for."
(California Civil Jury Instructions No. 312. Substantial
Compliance.)
Opponents argue that the bill limits good cause to the
"failure of the franchisee to substantially comply with the
franchise agreement," and removes the words "any lawful
requirement" of the franchise agreement. This language
poses a much higher threshold for a franchisor to establish
than the "failure of the franchisee to substantially comply
with lawful requirements of the agreement." California
would be the only state imposing such a high threshold. The
language in this Section allows a franchisee to avoid
termination, no matter how serious and longstanding its
default and failure to cure, as long as the franchisee
complies with its remaining obligations. Each default
situation will require an individual balancing of the
uncured default against the balance of the required
contractual performance in order to assess "substantial
compliance."
b) Allow 60-day opportunity to substantially comply with
franchise agreement. BPC Section 20020 allows the
franchisor to set a period of time to cure noncompliance
with the franchise agreement "which in no event need be
more than 30 days to cure the failure." Supporters report
that franchisees are often given as little as 5 days to
cure noncompliance; an unreasonable amount of time
depending on the nature of the cure needed. Therefore,
providing 60 days to cure is a reasonable solution common
to many other commercial transactions.
Initially, opponents argued that the substantial compliance
standard and the extended opportunity to cure provisions
will make it burdensome and difficult for existing
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franchisors to conduct business in California, and will
render it an unattractive place to open new franchises.
Proponents argue that economic data derived from states that
employ the substantial compliance standard and a 60-day
notice before termination requirement, or both, do not
support this contention. Instead, they report that between
2003 and 2013, the eleven states that have one or both of
these provisions had an average franchised unit growth rate
of 23.2 percent, as compared to the 18.9 percent growth
rate for the other 39 states and the District of Columbia
that have neither provision in law. Of those eleven
states, five (Arkansas, Nebraska, New Jersey, Rhode Island
and Wisconsin) employ both the "substantial compliance"
standard and require at least 60 days' notice before
termination. The same data show that the franchise growth
rate for those five states is essentially identical to the
growth rate as compared to the other 45 states and the
District of Columbia (19.4 percent vs. 19.8 percent,
respectively.) In short, proponents contend that
"substantial compliance" standards and extending the time
frame to cure noncompliance of the agreement have resulted
in greater certainty and investment protection, not less,
for franchisees in those states that employ such standards.
Opponents assert that Section 20020 contains no cap on the
cure period beyond the minimum 60-day cure period in which
a franchisee has the opportunity to fix a violation of the
franchise agreement. Each franchisee will be able to argue
that the new 60-day minimum cure period, already at least
twice as long a cure period as the cure period in the
current statute, still is an inadequate cure opportunity.
That will result in a case-by-case analysis of the proper
cure period for a particular franchisee, in a particular
situation, involving a particular default. There will be
no guidance for franchisors and franchisees, inviting
litigation in each and every situation. "We suggest a cap
on the franchisee's cure period [of 75 days]."
c) Clarifies grounds for immediate termination. Existing
law, BPC Section 20021, provides for a number of
circumstances that justify immediate notice of termination
of a franchise agreement without an opportunity to cure.
These circumstances are considered so serious that they
threaten to damage the brand reputation of the franchise
and are thus grounds for immediate termination by the
AB 525 (Holden) Page 19
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franchisor, for example, when a franchisee abandons the
business, is convicted of a felony, goes bankrupt, or the
franchise operation poses an imminent danger to public
health. One set of circumstances listed in Section 20021
calls for immediate termination when "the franchisee fails,
for a period of 10 days after notification of
noncompliance, to comply with any federal, state or local
law or regulation applicable to the operation of the
franchise." Supporters of the bill contend that, like the
provision that allows early termination "for any lawful
requirement of the franchise agreement," this particular
set of circumstances justifying immediate termination
should be clarified to avoid an unnecessarily broad
interpretation of laws that would allow the franchisor to
immediately terminate the franchise agreement.
Accordingly, the bill clarifies that violations of federal,
state of 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,
are grounds for immediate termination.
d) Removes "monetization of equity" provision for
termination or nonrenewal of a franchise and requires
instead "compensation" to franchisee for inventory,
supplies, equipment, fixtures and furnishings at current
depreciated value. Unlike other types of contract law in
California, the CFRA only entitles franchisees to recover
the cost of any existing inventory remaining upon
dissolution of the franchise. Current law that allows the
franchisor to essentially take all equity, personal
capital, and goodwill a franchisee has developed upon
franchise dissolution is particularly unfair to small
business franchisees, contends the Author, given that
franchisees invest a large amount of their own money in the
business and continue to pay for upgrades and changes in
response to the market. Even if the franchisor breaches
the franchise contract, the franchisee is limited by the
original franchisee agreement in what contract damages they
can claim.
This measure, prior to recent amendments on June 15, 2015,
codified the IFA's own "Statement of Guiding Principles" by
providing for a franchisee's right to "monetize any equity"
AB 525 (Holden) Page 20
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they have developed in their business prior to the
termination or nonrenewal of the franchise agreement, this
"equity" included the fair market value of the franchise
and franchise assets, all investments in the franchise made
by the franchisee, including, but not limited to, purchase
of real property, equipment, inventory, advertising, and
real estate.
The recent amendments to Section 20022 of the BPC removed
this requirement and instead now provides for compensation
to the franchisee, upon termination or nonrenewal of a
franchise, for the value of price paid, minus depreciation,
of all inventory, supplies, equipment, fixtures and
furnishings purchased or paid for by the franchisee from
the franchisor or its approved supplier, or other sources
under the terms of the franchise agreement or any ancillary
or collateral agreement, and, at the time of the notice of
termination or nonrenewal, are in possession of the
franchisee or used in the franchise business. It also
specifies under what circumstances a franchisor would not
have to compensate the franchisee for the above items, or
provide for an offset against amounts owed to the
franchisee.
The opponents still raise a concern about including the term,
"termination" under this Section since it would allow for a
franchisee to receive compensation from the franchisor when
its franchise agreement is terminated for cause [immediate
termination without an opportunity to cure]; a previous
version of AB 525 at least excluded from coverage any
termination under Section 20021. Opponents ask, "Why
should a franchisee whose franchise is legitimately
terminated under the new and heightened good cause standard
be entitled to any compensation?"
A bad-actor or wholly incompetent franchisee can unfairly
harm a franchise system by daring the franchisor to
terminate the franchise, knowing that the franchisor
ultimately must compensate the franchisee even if the
termination decision is lawful.
Opponents are also concerned that one of the reasons for not
compensating the franchisee would be if the franchisee
retains control of the principal place of the franchise
business. Opponents argue that there should be no
compensation to the franchisee "if the franchisor does not
AB 525 (Holden) Page 21
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prevent the franchisee from retaining control of the
franchise business." It should be the franchisor
preventing the franchisee from continuing the use of the
franchise business, not the franchisee who decides to
retain control of the business.
Opponents believe as well that the compensation would not be
needed if the franchisor and franchisee mutually agree not
to renew or where purchases are required by applicable law.
As explained by the opponents, this is to clarify that the
parties can mutually agree not to renew and Section 20022
(g) will not be applicable. Similarly, a franchisor should
not be required to pay the franchisee for items the
franchisee must purchase because of the requirements of
applicable law and not because the franchisor requires such
purchases.
Opponents lastly indicate that compensation would not be
needed if the franchisor provides notice of nonrenewal of
the franchise agreement not less than one year prior to the
expiration date of the agreement during which time the
franchisee has the opportunity to transfer or assign the
franchise or the assets of the business.
e) Attempts to streamline process and timeline for sale,
assignment or transfer of franchise business by franchisee.
BPC Section 20025 required a franchisor to notify the
franchisee of its intention not to renew a contract at
least 180 days prior to the expiration of the franchise
under specified circumstances, during which time the
franchisee may attempt to find a purchaser acceptable to
the franchisor that meets their current requirements
regarding new franchises or for renewal franchises, and
provided that nothing shall prohibit a franchisor from
exercising a right of first refusal to purchase the
franchisees business.
BPC Section 20027 limits the transfer of franchises to family
members of a deceased franchisee as long as those family
members meet criteria for owning a franchise as determined
by the franchisor. Similarly, Section 20027also provides
the deceased franchisee's family the opportunity to sell or
transfer the franchise to a third party that meets the
franchisor's criteria for owning a franchise, as specified.
AB 525 (Holden) Page 22
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According to the Author, this bill seeks to establish a
streamlined process and timeline for the sale or transfer
of a franchise and under what conditions the sale,
assignment or transfer could occur. Section 20025 is
repealed and two new Sections were added to the CFRA. The
Section 20028 specifies that it is unlawful for a
franchisor to prevent a franchisee from selling or
transferring all or substantially all of the assets of the
franchise business, or a controlling interest in the
franchise business, to another person provided that the
person is qualified under the franchisor's then-existing
and reasonable standards, as consistently applied to
similarly situated franchisees operating within the
franchise brand, for the approval of new or renewing
franchisees, but also provides that the franchisee shall
not have the right to sell, transfer, or assign the
franchise or substantially all of the assets of the
franchise business, or a controlling 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 does not meet the
standards for new or renewing franchisees as specified.
The measure also details the requirements of the notice and
other necessary information and documentation that shall be
provided to the franchisor and provides that the franchisor
may still exercise their right of first refusal to purchase
the franchise.
Opponents argue that the new requirements of Section 20028
appear to allow unfettered transfers by franchisees of
non-controlling interests in either the franchise business
or the legal entity that is a party to a franchise
agreement. Applying transfer qualifications only to a
person who obtains all or a controlling interest of a
franchise eliminates the qualification requirements of
people who may acquire lesser ownership interests in a
franchise. All purchasers or acquirers of an interest must
be qualified in order to protect the brand and the
integrity of the franchise. For example, someone could
purchase a 10% ownership and may be selected to operate the
franchise. Or someone acquiring a non-controlling interest
could already own or operate a competing business, buy his
way into the franchise business to which he otherwise would
AB 525 (Holden) Page 23
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not have had access, and now have access to proprietary
information generally unavailable to competitors. The
franchisor should have the right to review and approve all
potential owners of the franchise business or legal entity.
In addition, retaining the word "reasonable" as a modifier
of "standards" under Section 20028, rather than relying
solely on "then applicable" or "then-existing" standards,
for the approval of new franchisees, allows every
franchisee to challenge any standard a franchisor
articulates, even if the franchisor consistently applies
the standard to similarly-situated franchisees.
f) For violation of CFRA, provides for reinstatement, award
of damages or fair market value of franchise to the
franchisee. Current BPC Section 20035 provides that in the
event a franchisor terminates or fails to renew a franchise
other than in accordance with the CFRA, 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 language in this Section has now been eliminated and
recast and now specifies that in the event that a
franchisor terminates or fails to renew a franchise in
violation of the CFRA, the franchisee shall be entitled to
either of two remedies: (1) "reinstatement" of the
franchisee under the same terms as the existing franchise
agreement and for the franchisor to pay all damages caused
thereby; or (2) upon the request of the franchisee, or if
the relief provided for pursuant to reinstatement above 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 the CFRA.
It also provides that a court may to grant preliminary and
permanent injunctions for violation of threatened violation
of the CFRA.
Opponents argue against the "reinstatement" remedy and
contend that it still makes no sense when the franchisee
may seek injunctive relief to stop an allegedly
inappropriate termination or non-renewal and also be
entitled to recover damages. In the event of a violation,
AB 525 (Holden) Page 24
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the franchisor must pay the franchisee the fair market
value of the franchise and franchise assets and any other
damages caused by the violation. This is an adequate
remedy.
g) Measure Have Prospective or Retroactive Effect.
Although laws which are generally passed by the Legislature
have prospective effect unless explicitly indicated
otherwise in the measure, Opponents are concerned that
since there is no language specifying that SB 525 will have
only prospective application that this would unfairly and
unconstitutionally impair all existing franchise agreements
that were entered into by franchisors and franchisees under
a specific set of legal rules and expectations. "Litigation
attacking the constitutionality of AB 525 on this basis
alone would be a given."
7.Prior Legislation. SB 610 (Jackson) of 2014 would have
revised various provisions of the California Franchise
Relations Act with respect to termination or transfer of a
franchise, as well as the right of association among
franchisees. ( Status : This bill was vetoed by the Governor. In
his veto message he indicated the following:
"This bill alters the relationship between franchisors and
franchisees by, among other things, changing the standard
required to terminate a franchise agreement from "good cause"
to a "substantial and material breach." While the "good cause"
standard is common and well understood, the standard provided
in this bill is new and untested.
The bill's changes would significantly impact California's vast
franchise industry that relies on the certainty of
well-settled laws. I am open to reforming the California
Franchise Relations Act to give more protections to
franchisees if there are indeed unacceptable or predatory
practices by franchisors. I need, however, a better
explanation of the scope of the problem so I am certain that
the solution crafted will fix those problems and not create
new ones.
Additionally, the parties supporting and opposing this bill have
diametrically different views. Given the polarized positions,
it is in the best interest of all that a concerted effort be
made to reach a more collaborative solution.")
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AB 1141 (Dahle) of 2013 would have enacted the "Small
Business Investment Protection Act of 2013" to incorporate
some of the good faith and rights association provisions of
SB 610 as well as changes to the right to terminate a
franchise agreement. ( Status : This bill was held in the
Assembly Judiciary Committee).
AB 2305 (Huffman) of 2012 would have enacted "The Level
Playing Field for Small Business Act of 2012" to revise the
rights and responsibilities of franchisors and franchisees as
well as the rules that govern the franchise relationship in
California. ( Status : This bill was held in the Assembly
Business, Professions and Consumer Protection Committee).
SB 814 (Oller) of 2001 would have authorized a franchisee to
pursue damages, including attorney's fees, from a franchisor
that violates the CFRA by terminating or failing to renew a
franchise. It also provided a franchisee could seek
injunctive relief if the franchisor did not provide adequate
notice of termination of a franchise to seek injunctive
relief. ( Status : This bill was held in the Senate Judiciary
Committee.)
8.Arguments in Support. The Coalition of Franchisee
Associations (CFA) is the sponsor of this measure and explains
that across the country, millions of small business owners
embrace the entrepreneurial spirit and support their local
communities by opening their own franchise. These businesses
are their livelihood, supporting their family and the families
of their employees. However, contracts with franchisors, the
franchise agreement, allow franchisors to take away that
livelihood for any reason, with all the equity the franchisee
invested into it and without recourse for the franchisee.
Franchisees have had their business terminated without any
proof of any substantial violation of a contract or with
manufactured evidence. They have also been denied the ability
to sell, assign or transfer their business to a legitimate
purchaser. After the business is taken, the franchisee cannot
even recover the hundreds of thousands of dollars they have
invested. This is all done through unethical intimidation
tactics that remain legal because franchisors write contracts
that allow them to do what they want and hide behind vague
state laws. According to CFA, this bill will clarify state
law to specify that a franchisor can terminate a franchise,
AB 525 (Holden) Page 26
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but only when there are serious and substantial violations of
contract. It will also allow these small business owners to
sell their business to legitimate buyers or family members,
prevent franchisors from terminating a franchise without any
opportunity to cure, and allow franchisees to renew their
contracts pending compliance so as to continue their financial
and personal investment in the franchise.
The Service Employees International Union supports the bill and
writes, "These provisions are significant steps toward
rebalancing the relationship between franchisors and
franchisees. Prohibiting unfair terminations and non-renewals
ensures that franchisees who play by the rules have the
opportunity to thrive, while still providing franchisors with
authority to terminate or not renew franchisees who don't meet
franchise standards. Protecting franchisees' rights to
transfer their business means that franchisees can pass their
franchise on to their children or sell it can reap the reward
of their labor and investment. Many franchisees operate in an
unpredictable environment of ever changing rules and financial
requirements as dictated by the franchisor. A more balanced
system would stabilize franchisees and enable them to invest
in their business as well as pay living wages to a chronically
underpaid low-wage workforce."
The California Labor Federation also supports this measure and
believes it will clarify exiting law and provide modest and
important protections to franchisees. The provisions in the
bill are significant steps toward rebalancing the relationship
between franchisors and franchisees. Prohibiting unfair
terminations ensures that franchisees that play by the rules
have the opportunity to thrive, while still providing
franchisors with authority to terminate franchisees who do not
meet franchise standards. Protecting franchisees' rights to
transfer their business means that franchisees can pass on the
fruits of their labor. Allowing franchisees to receive
compensation for their investments in the franchise will
enable them to recoup some what they put into the business
upon termination of the franchise. "The current system is one
where the franchisor has all the power and the franchisee has
little security or say. This structure is not only unfair for
small business owners, but it also promotes a low-wage, high
turnover environment for the almost one million fast food
workers. Franchisees need the protections in this bill,
especially those seeking to do the right thing for their
AB 525 (Holden) Page 27
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workers."
Other proponents of this measure including the Small Business
California and the Small Business Majority and many of the
franchisees from across the nation and state make similar
arguments and the need for this measure. They indicate that
the legislation is crucial to helping California's small
franchises grow and thrive. While franchisee-franchisor
relationship is often mutually beneficial, there have been
instances of franchisors taking advantage of individual
franchise owners, using their contract as a shield. Certain
franchisors include unfair provisions in their contracts to
limit franchisee rights while others have broadly interpreted
state law to terminate the franchise agreements without cause
and avoid their legal obligations to give franchisees another
chance or return the franchisees basic investment. This has
led to business owners who have invested their money into a
franchise to be left with no possibility to regain the equity
invested and no legal recourse to gain their investment back.
9.Arguments in Opposition. The International Franchise
Association (IFA) has an "Oppose Unless Amended" position on
this measure. The issues and most of the suggested changes
they propose are reflected in this analysis. The IFA has
argued initially that, "AB 525 is unnecessary. California
already regulates franchise disclosure above and beyond the
requirements established by the Federal Trade Commission's
Franchise Rule to provide consumers with protections about the
investments they feely enter into under the CFIL.
Additionally, California regulates certain terms of the
relationship between franchisor and franchisee under the
Franchise Relations Act. If adopted, AB 525 would make it
extremely difficult for existing franchise systems to conduct
business in California, rendering the state an unattractive
place to open a new franchise business." IFA has, however,
been working with the Author's office to try and address many
of their concerns with this bill. It appears as if the
Author's office has tried to address many of these concerns
and have met with the IFA and the opponents and provided this
Committee with at least two significant sets of amendments;
one set of amendments on June 15, 2015 and another on June 23,
2015.
As of June 25, 2015, this Committee received an "Oppose Unless
Amended" letter from the Civil Justice Association of
AB 525 (Holden) Page 28
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California (CJAC) and they state that this bill "would create
uncertainty and encourage litigation in the franchise
relationship by
(1) changing the standard under which a franchisee agreement may
be from good cause when failing to comply with lawful
requirements of the contract, (2) introducing new, litigious
standards on nonrenewals/nontransfers of the franchise
relationship, and (3) impacting existing, complex long-term
contracts making these changes retroactive." CJAC goes on to
raise many of the same concerns which have been expressed by
IFA.
10.Policy Issue : Is it intended that petroleum companies and
their convenience stores (mini-marts) would be covered under,
or exempt from the current requirements of the CFRA?
Petroleum related franchises are regulated by both state law,
BPC § 20999 et seq., and federal law, the Petroleum Marketing
Practices Act. Both statutes outline "good cause"
requirements for the termination and non-renewal of a
franchise. However, it is unclear whether state or federal
"good cause" guidelines would apply to their convenience
stores or "mini-marts" located at the same premises as a
franchise governed by the Petroleum Marketing Practices Act.
The Author may wish to clarify in the future whether or not it
is intended that these franchises would be covered under this
measure.
11.Recommended Amendments:
a) Because of concerns raised that there is no cap on the
cure period beyond the minimum of 60-day cure period in
which a franchisee has the opportunity to fix a violation
of the franchise agreement, recommend the following
amendment:
On page 3, line 10, insert after "failure.": In no event
will the right to cure the failure exceed 75 days unless
there is a separate agreement between the franchisor and
franchisee to extend the time.
b) Because of concerns raised that under Section 20028 the
franchisor would not have the right to review and approve a
person who may acquire a lesser ownership interest in the
franchise and possibly threaten the brand and integrity of
the franchise, recommend the following amendment:
AB 525 (Holden) Page 29
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On page 5, line 40, insert after "controlling": or
non-controlling interest
On page 6, line 9, insert after "controlling": or
non-controlling interest
On page 6, line 27, insert after "controlling": or
non-controlling interest
On page 6, line 31, insert after "controlling": or
non-controlling interest
c) Clarify that the implementation of this measure will be
prospective rather than retroactive.
NOTE : Double-referral to the Senate Committee on Judiciary.
SUPPORT AND OPPOSITION:
Support:
Coalition of Franchisee Associations (Sponsor)
California Association for Micro Enterprise Opportunity
California Beer and Beverage Distributors
California Fair Franchise Association
California Labor Federation
EA Independent Franchisee Association
East Valley Business Legislative Advocacy Committee
Service Employees International Union
Independent Organization of Little Caesars Franchisees
North American Association of Subway Franchisees
Plumbing Heating Cooling Contractors Association of California
Small Business California
Small Business Majority
10 Individual Business Owners and Representatives and
Franchisees
Opposition:
Civil Justice Association of California (Oppose Unless Amended)
International Franchise Association (Oppose Unless Amended)
-- END --
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