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Franchise Friction in the California Legislature

The California State Assembly is poised to consider a new piece of consumer protection legislation this week.

Senate Bill 610, already approved by the State Senate, has the potential to drastically reshape the landscape of fast food and other heavily franchised industries throughout the state. The bill proposes to make it more difficult for franchisor corporations, including various fast food empires, to end licensing agreements with franchisees. SB 610 has stirred considerable controversy within the business community, even as unions rally to reshape the franchising business paradigm.

Franchisors such as McDonald’s have claimed that the bill would impair their ability to maintain uniformly high quality standards across locations. Proponents of the bill insist that the bill is necessary to protect the rights of franchisees and employees alike.

The Assembly will consider whether or not existing state law governing franchises is adequate to protect franchisees from capricious or otherwise unfair acts on the part of the franchisors. If signed into law, the proposed bill would require franchisors to demonstrate that franchisees had substantially and materially breached a requirement of the franchise agreement. SB 610 furthermore prevents licensing agreements from obstructing the rights of franchisees, such as the right to participate in franchisee associations, or the right to lawfully sell their franchises with the consent of the franchisor.

To learn more about SB 610 and other business law matters, contact us today.


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