California Franchise Legislation Defeated

IFA’s efforts to defeat Senate Bill 610 in California have been successful.  Last night, Senate Bill 610 was defeated for the year as the sponsor of the bill pulled the legislation off today’s California Assembly Business, Professions & Consumer Protections Committee docket when it became clear there was scant support for the bill by the Committee’s 10 Democrats and four Republicans.

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“This represents a critically important victory for the IFA and the franchising industry.  This victory is the direct result of an intense two-month IFA integrated lobbying, grassroots communications and public affairs campaign,” said IFA President & CEO Steve Caldeira.  “By deploying grassroots field teams in California that were able to identify and engage hundreds of franchisees and franchisors in Committee members’ districts who opposed the bill, California legislators understood that SB 610 was a solution to a problem that did not exist.”

By hearing directly from franchisors and franchisees about the strength of the franchise model, the partnership that exists between both parties, and the strong regulatory environment the industry is already governed by, legislators recognized SB 610 undermined brand integrity by allowing substandard operators to remain in operation.  This in turn, hurts franchise brands and the equity and investment of both franchisors and franchisees, not only in California, but also throughout entire franchise systems.

IFA’s campaign included a variety of tactics to reach lawmakers, including hundreds of letters delivered to Committee members, in-district meetings during the July recess, op-eds by franchisors and franchisees and editorials in key publications opposing the bill.  The campaign reached a seminal moment on Aug. 7 as an IFA-led delegation of 20 franchisees and franchisors, including members of IFA’s Franchisee Forum led by Saunda Kitchen (Mr. Rooter of Sonoma County) were in Sacramento to lobby against SB 610.

Representing a broad cross-section of the franchising industry, IFA members demonstrated the negative impact SB 610 would have on the franchise business model for both franchisees and franchisors, diffusing and undermining the message of the bill’s proponents that the bill was supported by franchisees and opposed by franchisors.  Lawmakers and staff expressed particular concerns with the ramifications of creating a statutory duty of good faith given the likelihood it would make franchise contracts nearly impossible to enforce and undermine franchisors’ ability to improve substandard locations.

“While the bill is defeated for 2013, moving forward, IFA has built a strong coalition and grassroots operation to ensure the bill does not move forward in its current form in 2014,” said Caldeira.  “Such legislation seeks to undermine the franchising business model by driving a wedge between franchisors and franchisees by propping up the underperforming few at the expense of the large majority of franchisors and franchisees who work day-in and day-out in partnership to uphold the terms of their contracts and to help our industry continue to grow.”