Pros and Cons of California Bill 610: Will It Make Much of a Difference?

The California legislature passed Bill 610 on August 21, 2014. The bill is awaiting the governor’s decision to sign or veto it. The bill prohibits franchisors from terminating a franchise agreement for minor violations. The bill also prohibits franchise agreements from restricting franchisees from participating in an association of franchisees. Additionally, the bill prohibits a franchise agreement from preventing franchisees from selling or transferring their interest in the franchise.

The bill gives more rights to franchisees, which some say is a good thing. Supporters argue that the bill would help offset increasing franchisor control over franchisees. In addition to giving more rights to franchisees, supporters say that the bill could help in the fight to raise franchise workers’ pay. They argue that franchise arrangements which usually require significant payments to franchisors from franchisees lead to franchisees paying low wages to their employees. Making changes to the franchise system through California Senate Bill 610 could lead to more changes in California and throughout the U.S.

Opponents say that the bill may lead to more lawsuits and could discourage franchising in California. Opponents say that the bill does not add much to the protections that franchisees receive from the courts already. For example, franchisors cannot terminate a franchise agreement for minor reasons and can be required to pay damages for improper interference when a franchisee tries to sell or transfer a franchise. Opponents argue that the lawmakers should not rewriting and drafting employee contracts agreed upon by franchisees and franchisors and should not force these changes in franchise agreements.

We will have to wait and see whether California Governor Jerry Brown decides to sign or veto the bill. Either way, Bill 610 is generating controversial discussions about hot topics in franchising not necessarily limited to California.

Contact Gunderson, Denton & Peterson, P.C to speak to a franchise lawyer today!

Written By Brad Denton

Gunderson, Denton & Peterson, P.C.

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