Sacramento: The Assembly Judiciary Committee today overwhelmingly approved a bill authored by Assemblymember Chris Holden and Assembly Speaker Toni Atkins to protect the rights of small-business franchise owners. The vote was 7-2.
AB 525 makes it more difficult for major chains to unfairly terminate their franchise operators. The measure will clarify the current vague and one-sided law to close loopholes and prohibit a corporation from closing a franchise business unless there has been a substantial violation of the contract, the law or local regulations. It also allows franchisees to keep the equity they invested in the event of termination.
“These small business owners invest in a franchise hoping it leads to the American Dream of small business ownership. Instead, many find a nightmare of intimidation and lost business opportunities,” explained Assemblymember Holden. “Franchise corporations should not be able to use their dominance to rob franchisees of their livelihood without good reason. They should not be able to destroy someone’s future by hiding behind an unjust contract and weak state laws.”
Holden’s AB 525 is similar to the strong franchise laws in New Jersey, Wisconsin, Nebraska and other states with thriving franchises. AB 525 clarifies the legal standards required in the legislation to make the law easy to implement in the courts and fair for the franchises.