Today, the California Legislature will host a committee hearing on Assembly Bill (AB) 2305, “The Level Playing Field for Small Businesses Act of 2012.” The authors of the bill, Democrat Assemblymembers Huffman and Ammiano, claim that franchise agreements tend to be “one-sided and nonnegotiable,” in favor of the franchisor and against the franchisee. They contend that “California franchisees have been the victims of economic opportunism of franchisors,” since they do not have the ability “to negotiate on an equal footing” with their franchisors. Also, they claim that “California franchisees have also been victimized by territorial encroachment, franchisor lack of competence and negligence, unfair required purchases, and other misconduct.”
Sounds like class-warfare rhetoric against California’s very own job creators, eh?
Citing these supposed “injustices” against franchisees, Huffman and Ammiano thus conclude that franchisees need more protections against their so-called “oppressive” franchisors. To enact these protections, Huffman and Ammiano have decided to revise the California Franchise Relations Act and the Franchise Investment Law with provisions that not only interfere in the franchisor-franchisee relationship, but also impose more red tape and regulations on businesses.
Some of the provisions include allowing franchisees to freely unionize and have collective bargaining rights, requiring franchisors to provide a “duty of competence” to their franchisees, requiring franchisors and franchisees to have “good faith” towards each other, enabling franchisees to use an unlimited amount of franchisor-approved vendors, penalizing franchisors that set up a new franchise that results in a 6% loss of annual gross sales at a nearby existing franchise, and allowing franchisees to be compensated and awarded with an affordable attorney if any of these provisions are violated.
If enacted, AB 2305 will put forth more government interference into the franchisor-franchisee relationship all in the name of “job growth” and watching out for the “little guy.” Looks like Huffman, who is all about “Getting Things Done for the North Bay,” and Ammiano, who highly values his “strong progressive values,” want to drive California’s economy into oblivion with their maniacal-schizophrenic, bureaucratic micromanagement.
While 7-Eleven, Subway, UPS, Arco AM/PM, Big O Tires franchise store owners and several out-of-state franchises (seriously?) have openly expressed their support for AB 2305, California Chamber of Commerce, California Retailers Association (CRA), Civil Justice Association of California (CJAC), and International Franchise Association (IFA) have all strongly opposed it.
On March 12, 2012, the IFA released their position paper on AB 2305, urging their members to oppose it. In their paper, they stated that AB 2305 is anti-consumer, anti-business, anti-jobs, and will create burdensome legal expenses. The IFA states that this bill’s encroaching nature would force franchisors to expand their businesses outside of California, leave minorities and women with minimal franchise opportunities, limit the amount of new capital that franchisors receive, and give rise to unnecessary lawsuits.
Luckily, there is a coalition of Californians called “Save Franchise Jobs, Stop Lawsuits” who are working against this bill. If you live in California, please contact your Assemblymember, Assemblymember Fiona Ma, and Assemblywoman Mary Hayashi. Tell them that AB 2305 will continue to kill jobs in California.
Already, California has the third worst business climate tax and has lost 4 million residents to other states over the past 20 years. If AB 2305 is enacted, California will continue to lose its reputation as America’s “Golden State” as government bureaucrats continue to over regulate businesses.