California Law Addresses Franchisee Rights

The California State Assembly is now reviewing proposed legislation for fair franchising rights that would afford franchisees new protections in their relationships with franchisors. The proposed bill, “The …

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The California State Assembly is now reviewing proposed legislation for fair franchising rights that would afford franchisees new protections in their relationships with franchisors. The proposed bill, “The Level Playing Field for Small Businesses Act of 2012,” addresses several issues that have long concerned franchisees, including unfair terminations, protections against territorial encroachment and protections for franchisee associations, among other rights. Given California’s reputation as a barometer for the future legislation of other states, the Level Playing Field Act could set the stage for a revolution in franchise-industry relationships across the country if passed. For more on this continue reading the following article from Blue MauMau.

Proposed legislation has been introduced in the California State Assembly that would dramatically change the landscape of franchising in that state and perhaps set a strong precedent elsewhere. The legislation addresses issues that have been long festering with franchisees and franchisee advocates. If passed, the new law would provide significant protections for franchisees in a franchise relationship.

Assembly Bill 2305, called "The Level Playing Field for Small Business Act of 2012" was introduced in the California State Assembly by Assemblyman Jared Huffman (D-Marin California) last week. The Bill is co-authored by Assemblyman Tom Ammiano (D-San Francisco).

The proposed legislation seeks to amend several provisions of the California Franchise Investment Act and the California Franchise Relations Act. Some of the salient provisions of the proposed law:

  • Would impose of duty of good faith on the parties to a franchise agreement.
  • Would impose a duty of competence on franchisors
  • Would increase protections against territorial encroachment
  • Provides great protection against unfair terminations
  • Would add protections of franchisee associations
  • Solidifies the right of California franchisees to resolve disputes locally
  • Increases the statute of limitations to four years for most violations

Huffman is currently running for Congress, which may mean a new voice for franchisee advocates in Congress if he is elected.

The Bill is supported by the American Franchisee Association and the California Small Business Association.

Bills of this nature have not generally fared well in the past, and most reforms have been more narrowly drawn legislation. However, the State of California legislature and executive branch is currently dominated by Democrats, and the time may be ripe for more dramatic reforms in California. There could be an opportunity for this bill to pass with significant support from franchisee associations across the country.

This article was republished with permission from Blue MauMau.

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