Gov. Brown vetoes bill to protect franchise firms

Gov. Jerry Brown on Monday vetoed legislation to protect small-franchise owners against fast-food giants and convenience store chains, saying he needs more proof there is a problem before considering changes that would “significantly impact California’s vast franchise industry.”

The measure by Sen. Hannah-Beth Jackson (D-Santa Barbara) would have prohibited corporations from putting a franchisee out of business unless they have committed a “substantial and material breach” of the franchise agreement. The bill also would have protected a franchisee’s ability to sell or transfer the business without unreasonable interference.

Brown wrote in his veto message that he is open to reforming the franchise laws “if there are indeed unacceptable or predatory practices by franchisors. I need, however, a better explanation of the scope of the problem so I am certain that the solution crafted will fix those problems and not create new ones.”

Jackson said problems do exist.

“Current law allows these corporations to put these small franchisees out of business for even the most minor and arbitrary violations,” Jackson said recently in support of SB 610.

Franchise owners have complained that parent firms have forced them to give up their stores or blocked transfers of ownership.

“We are disappointed that Gov. Brown ignored the small-business owners who have invested our life savings and life’s work into creating California jobs, and instead sided with the giant corporate franchisors with his veto of SB 610,” said Keith Miller, chairman of the national Coalition of Franchisee Associations.

The veto was welcomed by Steve Caldeira, president and CEO of the International Franchise Assn.

“The legislation would have created unnecessary and unclear new regulations on franchisees across the state and would have also led to an excess of unnecessary and costly litigation in California,” Caldeira said in a statement.