Foodservice Equipment Reports

California Changes How Franchisors Can Do Business

The California State Assembly approved a law last week making it harder for franchisor companies, including foodservice chains, to terminate franchising agreements. Another version of the proposed law, SB 610, already had been approved by the State Senate last year. The bill now will return to the Senate for final approval.

Business groups, including the International Franchise Association, had fought passage of the law, stating it would obstruct franchisors’ ability to maintain a consistent level of quality across all of its franchised locations. They were rebutted by a coalition of franchisees arguing that the bill would protect their small businesses against domination by large corporations. The IFA said the law will harm California’s business climate.

“SB 610, particularly the termination language, is more vague and obscure in its definition than any other state franchise law,” said IFA Pres./CEO Steve Caldeira in a statement. “This bill without question will undermine franchise growth in California, lead to frivolous, unnecessary and costly litigation, reduced product quality, harm brand integrity.”

The Service Employees International Union supported the bill, voicing hopes that franchisees would be more willing to increase workers’ wages and benefits if doing so didn’t put their franchising agreements at risk.

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