Bill Text: CA SB610 | 2013-2014 | Regular Session | Enrolled
Bill Title: Franchises.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Vetoed) 2014-09-29 - In Senate. Consideration of Governor's veto pending. [SB610 Detail]
Download: California-2013-SB610-Enrolled.html
BILL NUMBER: SB 610 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 21, 2014
PASSED THE ASSEMBLY AUGUST 14, 2014
AMENDED IN ASSEMBLY JUNE 30, 2014
AMENDED IN ASSEMBLY JUNE 10, 2014
AMENDED IN ASSEMBLY JUNE 24, 2013
AMENDED IN SENATE MAY 9, 2013
AMENDED IN SENATE APRIL 8, 2013
INTRODUCED BY Senator Jackson
FEBRUARY 22, 2013
An act to amend Sections 20010, 20020, and 20035 of, and to add
Article 2.5 (commencing with Section 20016) to Chapter 5.5 of
Division 8 of, the Business and Professions Code, relating to
franchises.
LEGISLATIVE COUNSEL'S DIGEST
SB 610, Jackson. Franchises.
The California Franchise Relations Act sets forth certain
requirements related to the termination, nonrenewal, and transfer of
franchises between a franchisor, subfranchisor, and franchisee, as
those terms are defined. Existing law provides that any condition
purporting to bind any person to waive compliance with the act is
contrary to public policy and void.
This bill would provide that a condition of a franchise agreement
requiring the franchisee to waive the implied covenant of good faith
and fair dealing is contrary to public policy and void. The bill
would prohibit a franchise agreement from restricting the right of a
franchisee to join or participate in an association of franchisees to
the extent the restriction is prohibited by existing law. The bill
would prohibit a franchise agreement from preventing a franchisee
from selling or transferring a franchise or a part of the interest of
a franchise to another person, except as provided. The bill would
prohibit a franchise agreement from giving a franchisee a right to
sell, transfer, or assign the franchise, or a right thereunder,
without the consent of the franchisor, as provided. The bill would
prohibit a franchise agreement from allowing the transferring
franchisee to fail to notify the franchisor of the franchisee's
decision to sell, transfer, or assign the franchise, as provided.
Existing law prohibits a franchisor from terminating a franchise
agreement prior to the expiration of its term, except for good cause,
as defined, and upon the occurrence of specified events.
This bill would prohibit a franchisor from terminating a franchise
agreement prior to the expiration of its term unless there is a
substantial and material breach on the part of the franchisee of a
lawful requirement of the franchise agreement, except as otherwise
provided.
Existing law requires a franchisor that terminates or fails to
renew a franchise, other than in accordance with specified provisions
of law, to offer to repurchase from the franchisee the franchisee's
resalable current inventory, as specified.
This bill would require a franchisor that terminates or fails to
allow the sale, transfer, or assignment of a franchise, other than in
accordance with specified provisions of law, to, at the election of
the franchisee, either reinstate the franchisee and pay specified
damages or pay to the franchisee the fair market value of the
franchise and franchise assets, as provided.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 20010 of the Business and Professions Code is
amended to read:
20010. Any condition, stipulation, or provision purporting to
bind any person to waive compliance with any provision of this law or
to waive the implied covenant of good faith and fair dealing is
contrary to public policy and void.
SEC. 2. Article 2.5 (commencing with Section 20016) is added to
Chapter 5.5 of Division 8 of the Business and Professions Code, to
read:
Article 2.5. Relationships Between Franchisor and Franchisees
20016. It is unlawful for a franchise agreement to do any of the
following:
(a) Restrict the right of a franchisee to join or participate in
an association of franchisees to the extent the restriction is
prohibited by Section 31220 of the Corporations Code.
(b) (1) Prevent a franchisee from selling or transferring a
franchise or a part of the interest of a franchise to another person,
provided the person is qualified. A franchisee shall not, however,
have the right to sell, transfer, or assign the franchise, or a right
thereunder, without the consent of the franchisor except that the
consent shall not be unreasonably withheld.
(2) (A) Allow the transferring franchisee to fail, prior to the
sale, transfer, or assignment of a franchise or the sale, assignment,
or transfer of all, or substantially all, of the assets of the
franchised business or a controlling interest in the franchised
business to another person, to notify the franchisor of the
franchisee's decision to sell, transfer, or assign the franchise. The
notice shall be in writing and shall include all of the following:
(i) The proposed transferee's name and address.
(ii) A copy of all of the agreements relating to the sale,
assignment, or transfer of the franchised business or its assets.
(iii) The proposed transferee's application for approval to become
the successor franchisee. The application shall include forms and
related information generally utilized by the franchisor in reviewing
prospective franchisees, if those forms are readily made available
to existing franchisees. As soon as practicable after receipt of the
proposed transferee's application, the franchisor shall notify the
franchisee and the proposed transferee of information needed to make
the application complete.
(B) For the franchisor, to fail, on or before 60 days after the
receipt of all of the information required pursuant to subparagraph
(A), or as extended by a written agreement between the franchisor and
the franchisee, to notify the franchisee of the approval or the
disapproval of the sale, transfer, or assignment of the franchise.
The notice shall be in writing and shall be personally served or sent
by certified mail, return receipt requested, or by guaranteed
overnight delivery service that provides verification of delivery and
shall be directed to the franchisee. A proposed sale, assignment, or
transfer shall be deemed approved, unless disapproved by the
franchisor in the manner provided by this subdivision. If the
proposed sale, assignment, or transfer is disapproved, the franchisor
shall include in the notice of disapproval a statement setting forth
the reasons for the disapproval.
(3) In an action in which the franchisor's withholding of consent
under this subdivision is an issue, whether the withholding of
consent was unreasonable is a question of fact requiring
consideration of all the existing circumstances.
SEC. 3. Section 20020 of the Business and Professions Code is
amended to read:
20020. Except as otherwise provided by this chapter, a franchisor
shall not terminate a franchise prior to the expiration of its term,
except upon a substantial and material breach on the part of the
franchisee of a lawful requirement of the franchise agreement. If
there is a substantial and material breach of a lawful requirement of
the franchise agreement, the franchisor shall allow the franchisee
30 days to cure the failure before termination.
SEC. 4. Section 20035 of the Business and Professions Code is
amended to read:
20035. (a) In the event a franchisor terminates or fails to allow
the sale, transfer, or assignment of a franchise other than in
accordance with the provisions of this chapter, the franchisor shall
reinstate the franchisee in accordance with the provisions of this
chapter and shall pay all damages caused thereby, or, at the election
of the franchisee, shall pay to the franchisee the fair market value
of the franchise and franchise assets. A court shall be entitled to
grant preliminary and permanent injunctions for violations of this
chapter.
(b) In the event a franchisor fails to renew a franchise other
than in accordance with the provisions of this chapter, the
franchisor shall offer to repurchase from the franchisee the
franchisee's resalable current inventory meeting the franchisor's
present standards that is required by the franchise agreement or
commercial practice and held for use or sale in the franchised
business at the lower of the fair wholesale market value or the price
paid by the franchisee. The franchisor shall not be liable for
offering to purchase personalized items that have no value to the
franchisor in the business that it franchises.
