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In the News

BY Peter C. Lagarius
September 02, 2014

California Franchise Legislation Advances

Pending California franchise legislation, designed to strengthen existing franchise statutes, passed a final legislative committee on June 24, 2010. The Assembly Business, Professions and Consumer Protection Committee approved SB 610 by a vote of 10 to 2. SB 610 (http://bit.ly/1rBUcfQ) now moves to a final vote by the entire California State Assembly.

The amended bill addresses needed changes in the California Franchise Relations Act (CFRA), amending the previous proposal which was primarily limited to a statutory duty of good faith in franchisee relations. The amended legislation contains three changes to the CFRA. First, the ability to terminate a franchisee under the CFRA for “any” breach of a franchise agreement would be tempered; a franchisor terminating a franchisee under the CFRA must establish “substantial and material” breach of a franchise agreement. Second, a franchisor would have to approve a transfer of a franchise agreement if the buyer meets the franchisor's standards. Third, the CFRA would provide an additional remedy; namely a wrongfully terminated franchisee would have the option of reinstatement or could receive payment of the fair market value of the terminated franchise as the measure of damages.

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