Legislation by Assembly Majority Leader Chris Holden (D-Pasadena) to keep small business franchise owners from being put out of business without good reason passed out of the Senate on a vote of 34 to 0. AB 525 is jointly authored with Assembly Speaker Toni Atkins, Assemblymembers Bill Dodd (D-Napa) and Scott Wilk (R-Santa Clarita).
“What it really comes down to is that convenience store owners and fast food restaurateurs and other franchisees that put their life savings on the line will have a greater level of protection from having their contracts arbitrarily taken away,” said Assemblymember Holden. “This groundbreaking legislation is the result of a compromise between all the parties and marks a new future for small business owners who are the backbone of our state’s economy.”
“Small businesses are vital to California’s economy, and franchises are often a great way for someone to start a small business,” said Assembly Speaker Toni Atkins. “The agreement we reached on AB 525 gives franchisees more protections that allow them to keep their doors open, provide for their families, and employ workers, and it provides the consistency franchisors had said they need. It’s a win-win that will help more businesses succeed in California.”
AB 525 will raise the standard that must be met in order for a corporation to terminate a franchisee, set-up a framework that allows franchisees to sell or transfer their businesses, will compensate them for capital improvements they are required to make, and require franchisors to pay damages for any breaches of the franchise contract.
The bill is supported by a coalition of franchise owners as well as the Service Employees International Union (SEIU) who reached a historic compromise earlier this summer with the International Franchise Association which had opposed the bill.
AB 525 now goes back to the Assembly for approval of brief amendments before being sent to Governor Brown for signature.