California Senate Sends Fair Franchising Bill to Gov. Brown

Don Sneigowski of BlueMauMau reports that

The California state senate voted 23 – 9 late Thursday in favor of SB 610, a bill that strengthens franchisor good faith relations with franchisees. It is now ready for Governor Jerry Brown’s signature to become law. Although its proponents considered the bill a small tweak in franchise law, a clarification that would diminish lawsuits, opponents thought the opposite and have fiercely fought against its passage. The Los Angeles Times called the battle between franchisees, such as 7-Eleven and McDonald’s owners, and the large franchising firms that control the franchisees’ business operations one of the top business legal fights of the year for California.

Senator Hannah-Beth Jackson asks for senators to give SB610 an aye vote

“[SB] 610 will protect franchisees from unfair contract terminations while continuing to allow franchisors to terminate poor performers and those who hurt the franchise brand,” said the bill’s author, Senator Hannah-Beth Jackson, in introducing it to the floor of the state senate earlier in the afternoon for a vote. Senator Jackson pointed out that the right in the bill for franchisees to sell their businesses to qualified third parties were created for auto dealer franchises in 1973 under then-Governor Reagan. She added, “The bill reaffirms franchisees’ right to free association and the implied covenant of good faith and fair dealing that already applies to all contracts under California contract law.”

The International Franchise Association (IFA), a Washington, D.C.-based association formed in 1960 by a group of franchisors, has fiercely fought to stop the bill. “SB 610 has been, and continues to be, a solution in search of a problem that does not exist,” says the association’s chief executive Steve Caldeira.

But the majority of California lawmakers did not see it that way. They voted for the bill’s passage.