AB 525 Franchise Bill of Rights
Sacramento – Assemblymember Chris Holden’s bill to improve the rights of franchise owners in contract disputes with corporate bosses, has passed the Assembly Business and Professions Committee on a vote of 11 to 0. The measure, jointly authored with Assembly Speaker Toni Atkins and Assemblymember Scott Wilk, now goes to the Assembly floor.
AB 525 would make it more difficult for corporate operators to put franchise owners out of business by closing loopholes and adopting a “substantial compliance” standard that in essence says they 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.”
In addition, AB 525 will enable franchisees to recover their basic investment if the contract is terminated and will also allow franchisees to sell their businesses to a qualified buyer. The bill offers protections to small franchise businesses in fast-food restaurants, convenience stores and brand-name outlets.
Each of the proposed changes are modeled after states with balanced franchise laws including Minnesota, Nebraska, New Jersey, Rhode Island and Wisconsin.
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