Assemblymember Holden’s “Franchise Bill of Rights” Scores Big Win in California Assembly Vote (AB 525)

Thursday, May 14, 2015

Sacramento – Franchisees in California are one step closer to being treated as the small business owners that they are, and not employees, now that Assemblymember Chris Holden’s bill, AB 525, has passed off the Assembly Floor with a bipartisan vote of 54 to 10. The measure, jointly authored with Assembly Speaker Toni Atkins, Assemblymembers Bill Dodd (D-Napa) and Scott Wilk (R-Santa Clarita), now goes to the Senate. 

AB 525 would provide franchisee small business owners a greater level of protection from having their franchise contract arbitrarily terminated by adopting a “substantial compliance” standard for termination. This standard says franchise owners are making an honest effort to comply with the contract

“As a former small business franchise owner, I can tell you that the one-sided nature of a franchise relationship quickly becomes apparent after signing these documents,” testified Assemblymember Holden. “Right now it’s easy for a company to get rid of a franchisee whether they’ve done anything wrong or not. These small business owners invest substantial time and money into the enterprise and deserve to be protected.”

“Franchises are a great way for Californians to start small businesses, provide for their families, and employ workers from their communities,” said Speaker Atkins. “Unfortunately, loopholes in state law leave individual franchisees vulnerable to unfair practices from large corporations. AB 525 closes those loopholes and helps California franchises keep their doors open.”

The fear of termination and dissatisfaction with current franchise practices is widespread. In a statewide survey of franchisees, 40% of respondents said they might be terminated based on actions taken that they thought were appropriate for the operation of their business. When asked if they would recommend franchising to family or friends, 65% said they would not.

Each of the proposed changes are modeled after states with balanced franchise laws including Minnesota, Nebraska, New Jersey, Rhode Island and Wisconsin.