California Senate shows no faith in "good faith" franchising bill

August 14, 2013

Franchise rights advocates suffered a setback when the California Senate failed to vote on Bill 610, which would have required that good faith be an official part of franchising agreements. The new franchise law was opposed by representatives and lobbyists representing more than 40 big franchisors such as BP, The UPS Store and Fatburger. One senator counted the number of individuals and franchisees who had contacted him in support of the bill at over 700.

The committee chair told committee members that the main point that franchisors argued against was the overly vague concept of "good faith." Some franchisors claimed the term would only invite lawsuits while not actually helping the franchising relationship. They argued that the tiniest deviation from franchise agreements would unfairly necessitate a court action. Even one fly found in an otherwise spotless bathroom could potentially bring on legal challenges if it constituted a violation of good faith as set forth in an operations manual, according to arguments made by the bill's opponents. The bill was co-sponsored by a franchise attorney who recognized that a vote on the bill may have been premature. He said this would have prevented the bill getting the votes it needed for passage.

The bill actually passed in committee and was approved in a floor vote, but it was held up because of reports that the chair of the committee would not be voting in its favor. The bill was then put in cycle, which means that it may come up for a vote in the committee again next year. Supporters believe the bill will stand a greater chance of passing at that time.

Franchise operators needing advice in business and commercial law matters may find an attorney experienced in franchise law to be helpful. Such a lawyer may be able to help business owners stand up for their franchise rights and draft sound contracts and agreements.

Source: Blue Maumau, "California’s Good Faith in Franchising Senate Bill 610 Tabled!", Don Sniegowski, August 13, 2013