Proposed Law Could Change Franchise Business In California

A bill that just narrowly missed passing through the California Assembly could still lead to some dramatic new changes in laws that would affect franchisors and their business model. Called the Fast Food Accountability and Standards Recovery Act (“FAST Recovery Act”), also known as AB 257, the bill came within three votes of passing through the California Assembly, which would have put the bill just a governor’s signature away from putting into effect some strong new laws that could fundamentally alter the franchise restaurant industry.

Proposal: The Fast Food Sector Council

If enacted, the bill would create a new “Fast Food Sector Council,” made up of eleven members as appointed by the Governor, the Senate Rules Committee, and the Speaker of the California Assembly. Each of the eleven Council members would serve a four-year term, during which time they would have direct rule-making authority over the operations of fast-food restaurant franchisees and franchisors with more than 30 restaurants in the country.

Proposed New Authorities Over Wages And Working Conditions

Under AB 257, the Council would set the minimum wage, maximum working hours, and other working condition standards for employees in the fast-food restaurant industry. If the bill is passed into law, not only would it set up a new layer of government authority and oversight – with direct control over working conditions and some terms of restaurant franchise agreements – it would also allow for conflicts between fast food restaurant franchisees to become legal court actions filed against the franchisors over the franchise agreements, amid disputes over whether the agreements were in compliance with the laws and edicts of the Council.

Potential Legal Responsibility Under The Law

Franchisors could be found to be jointly and severally liable with their franchisees (meaning that they could share the blame or take all the blame on themselves, depending on the court’s ruling), if terms in the franchise agreement turned out to be a major reason for the franchisee’s legal liability. In keeping with this idea, agreements signed by franchisees to clear their franchisors of liability, such as indemnifications and waivers, would be considered void as against public policy and therefore unenforceable under the proposed new law.

Gone, But Not Forgotten

Since the bill was defeated on June 3, 2021 in the California Assembly, many might say that it is now history; after all, it lost by three votes in the State Assembly. However, the sponsor of the bill, Assembly Member Lorena Gonzalez, has moved to have the bill reconsidered, so the legislation may be back before the Assembly at the start of the new year. It is a proposal that deserves the attention of those in the franchise restaurant business, as its impact would be significant if it becomes law.

California Franchise Attorneys

For more insights on how FAST Recovery Act might affect your business, speak with a CA franchise attorney. The laws affecting franchisors and franchisees might seem complex and overwhelming. Because of this, it is recommended that you contact an experienced franchise lawyer to ensure that your business achieves its goals. Mohajerian Law Corporation is dedicated to assisting California franchisors and franchisees with various legal services including the negotiation of agreements and the resolution of disputes. To learn more about how we can help you, reach out to Mohajerian Law Corporation by calling (310) 556-3800 or by contacting us online.