Business

Franchisee rights bill passes state Senate, heads to governor's desk

Franchisee rights supporters say bill will bring fairness to David-and-Goliath relationship with large firms
Franchising is a $94-billion-a-year industry in California that employs nearly 1 million workers

SACRAMENTO — Legislation to give small franchise owners protections against fast-food giants, convenience store chains and other corporations headed to the governor's desk Thursday after winning a difficult vote in the state Senate.

The bill, SB 610 by Sen. Hannah-Beth Jackson (D-Santa Barbara), was one of the most hard-fought business proposals this year in the Capitol.

National and international franchise companies, such as McDonald's, Subway and Round Table Pizza, argued the proposal would upset basic contractual law to benefit a minority of disgruntled store operators.

Supporters — with the help of a powerful ally, the Service Employees International Union — countered that the bill would bring fairness to a David-and-Goliath relationship that has long favored the large companies.

"This protects the franchisee from unfair contract terms while continuing to allow the franchiser to eliminate poor performers and to protect the franchise brand," Jackson said.

The bill, which passed the Assembly last week, passed the Senate on a 23-9 vote after union and franchisee lobbyists spent hours working the ranks of so-called moderate Democratic members to round up the last few votes. Gov. Jerry Brown has not said whether he would sign it or veto it.

Discontented franchise owners, who have spent two years trying to get legislation passed, complained of being victimized by parent companies that force them to give up their stores or block transfers of ownership.

Some franchisees particularly want to stop what they call "churning." That happens, they say, when franchisers find an excuse to cancel a contract with a store owner so they can resell the location for a higher fee.

The big-brand franchising firms say there's nothing wrong with the current legal, contractual relationship between the large and small independent businesses.

Franchising is a $94-billion-a-year industry in California that employs nearly 1 million workers.

Robert Cresanti, executive vice president for public policy of the International Franchise Assn. in Washington, D.C., accused the SEIU of exploiting the franchise industry disagreements for its own aims. He said the union was seeking to fuel its national campaign to raise minimum wages for fast-food workers and ultimately unionize the restaurants.

"It's threat unlike we've ever seen," Cresanti said.

But SEIU spokesman Christopher Calhoun said: "I think that giving franchisees more power and control over small business is going to help workers in every way."

marc.lifsher@latimes.com

Twitter: @MarcLifsher

Copyright © 2014, Los Angeles Times
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