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Small Business California
2311 Taraval Street
San Francisco, CA 94116
The Honorable Hannah-Beth Jackson
Member, California State Senate
Sacramento, CA 95814
RE: SB 610 (Jackson) As Amended June 10, 2014 - Franchises - SUPPORT
Dear Senator Jackson:On behalf of Small Business California and its network of more than 5,000 employers who represent 3.2 million small businesses in this state, we are pleased to STRONGLY SUPPORT Your SB 610 that would impose restrictions on a franchisors’ ability to terminate a franchisee’s contract, provide the franchisees with a right to renew their franchise, protect the franchisees’ ability to sell their business to qualified buyers, and protect the franchisee from retaliation, if they join a franchisee association.
Senate Bill 610 will offer protections to small businesses who are franchisees to fast-food restaurants, retail stores, tax-preparation services, auto-repair shops and other businesses bearing major brand names. The franchisees often put their life savings at risk to start their businesses. Under current law, franchisors can put franchisees out of business for even the most minor violation of the Franchisor’s rule book – a rule book that can be modified to suit the franchisor at any time. For example, a franchisor can require the franchisee to purchase new equipment at any time during the contract period or terminate the contract if the small business franchisor is handing out too many coupons.
Senate Bill 610 is designed protect small-business owners by bringing some balance to the franchisor-franchisee relationship. Current California law allows franchisors to terminate franchise agreements for “good cause,” which includes a failure to comply with a requirement of the contract. But franchise contracts often specify dozens—or even hundreds— of requirements. Franchise agreements often allow the franchisor to inspect franchisees’ operations at any time and terminate the agreement for minor violations of the contract or of thousands of pages of manuals and other rules. And these are rules that the franchisor can often change unilaterally.
Senate Bill 610 gives franchisees’ rights to renew their franchise, if they comply with the franchisor’s standards. California law now allows franchisors to decide not to renew a franchisee’s contract for any reason or no reason at all. As with terminations, SB 610 would protect franchisees from nonrenewal, unless they commit substantial and material violations of their contract.
Senate Bill 610 protects franchisees’ ability to sell their business to qualified buyers. Franchisees should be able to sell it and reap the reward of their labor and investment. However, franchisors sometimes interfere in franchisees’ sale or transfer of the business, driving down the price or blocking the sale altogether. Franchisees need the right to be able to sell or pass on their business to qualified operators without interference. SB 610 would also protect franchisees from retaliation if they join a franchisee association.
Franchisee associations provide franchisees with a forum for discussing common problems and issues and with a collective voice for raising these issues with the franchisor. Some franchisees have reported that franchisors have retaliated against franchisees who join these associations. The bill would protect franchisees from retaliation for joining an association, thus ensuring that franchisees can continue to work together to improve conditions for their business.
For these reasons and more, Small Business California strongly SUPPORTS your Senate Bill 610. We greatly appreciate your leadership in this policy area and we look forward to working with you and your staff to ensure passage of this very important legislation. If you have any questions, please contact me directly at 415.680.2109 or email at firstname.lastname@example.org. Or, you may contact our Governmental Affairs Advocate in Sacramento, Lori Kammerer, Kammerer & Company, at 916.441.5674 or at LCK@midtown.net.
Scott Hauge, President
Small Business California
cc: The Hon. Ted Lieu, Chair, Senate Business, Professions & Economic Development
The Hon. Mark Wyland, Vice Chair, BP&ED and Committee Members
Bill Gage, Chief Consultant, Senate BP&ED
Amber Alexander, Republican Consultant, Senate BP&ED