March 18, 2016

Rights of Franchisees, Prospects of Litigation Rise Under New California Law

Matthew J. Kreutzer, Howard & Howard

California has recently amended its franchise law to regulate franchise agreements entered into or renewed after January 1, 2016, as well as franchises of an indefinite duration that may be terminated without cause.

The new law substantially amends the existing California Franchise Relations Act (CFRA), Cal. Bus. & Prof. Code §20000 et seq., and caps off a five-year effort by the legislature to implement additional protections for California franchisees against perceived franchisor abuses. The new law comes on the heels of a near miss in 2014, when the legislature passed the more rigorous Senate Bill 610, also intended to modify the CFRA. California Governor Jerry Brown vetoed SB 610, stating that he needed more proof that franchisors engage in “unacceptable or predatory practices” before he would sign off on a law that would “significantly impact California’s vast franchise industry.” Brown then stated that he would be open to amending the CFRA if legislators would take a more collaborative approach, including both sides of the industry.

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