A Step Forward for Responsible Franchising in the Golden State

It’s easy to get lost in the daily back and forth where our politics and society seem hopelessly divided, especially in the closing stretch of a competitive presidential campaign. Social media offers anyone with a “hot take” a platform to make their point.

Yet a look beneath the surface reveals some green sprouts of common ground toward progress – even in unlikely places.

You may have read my?recent post?on California Governor Gavin Newsom signing into law?S.B. 919, a groundbreaking improvement in consumer protection law aimed at improving disclosure and increasing transparency for prospective franchise owners. IFA has been a strong proponent of this legislation since its introduction in March 2024 by Democratic California State Sen. Thomas Umberg (D-34).

In a nutshell, S.B. 919 amends the California Franchise Investment Law (CFIL) to add requirements for independent franchise sellers, including franchise brokers and franchise sales organizations, who we worked closely with in crafting the legislation. More of the bill’s specifics are?available here.

We have championed this bill for three primary reasons:

1. It’s consistent with our Responsible Franchising principles;
2. Its process offers a roadmap for other states, cities and jurisdictions to follow;
3. It proves that common sense regulations are possible with all stakeholders present at the table.?

Let’s unpack each of these pillars, as well as their go-forward implications.

First, S.B. 919 is consistent with our principle that responsible franchising leads to strong franchise relationships – this means protecting the integrity of the franchise model itself and the community of small business owners and workers it supports.

IFA was founded on the concept that franchising the responsible way is the only way to preserve the model for future generations, and improved disclosure is one critical component to achieving that objective. Our?statement of Guiding Principles?released in 2012, lays out our commitment “to?advance improvements in franchise practices and enhance franchise relations”.

The guiding principle of Responsible Franchising is strengthening the franchise relationship where it begins—at the start of the franchise sales process, and S.B. 919 represents important progress toward that goal.

Second, while the exact specifics of future legislation may differ, the process that S.B. 919 went through is an example for other states to follow. The bill was a byproduct of working groups within the IFA comprised of franchisors, franchisees, franchise attorneys, and third-party franchise sellers – working closely with legislators on a sensible policy. The guiding principle was ensuring that everybody had transparency in the sales process, and to help prospective franchisees have as much information as possible before making a decision. With the growing role of third-party franchise sales, everyone agreed that we should start here to ensure that franchisees have a full picture of who is involved in the franchise sales process.??

Finally, it shows that the relationship between business and regulators can be symbiotic and cooperative. It doesn’t have to be antagonistic.?In fact, the development and production of the original franchise disclosure regime – known as the uniform franchise offering circular (UFOC) – and what ultimately became today's FDD - was the byproduct of IFA working alongside the FTC.

S.B. 919 had the input and buy-in of third-party sellers, who are critical to the growth of franchise brands, and clarifies their roles and creates a more level playing field. It was also intentionally designed to require minimal resources to implement the registration and disclosure requirements. No one was interested in adding overbearing red tape for the sake of increasing costs and operating headaches.?Upon the law being signed, Alesia Visconti, President and CEO of FranServe, the world’s largest franchise consulting and broker organization,?praised?the effort as a “win for franchising,” by “giving the public greater transparency with brokers and FSOs.” Other IFA member broker and FSO groups are supportive as well.

IFA members are committed to being champions of Responsible Franchising, and our support of the California bill is just the starting point.

Prior to S.B. 919, third-party franchise sellers in California operated without oversight, leaving prospective franchisees and franchisors in the dark and potentially vulnerable about making sound investment decisions.

We are grateful to our allies who stood alongside us in the fight to get S.B. 919 over the finish line, including?Senator Umberg, the The Coalition of Franchisee Associations (CFA), and the AMERICAN ASSOCIATION OF FRANCHISEES & DEALERS TR 030192 , among many others.

The bipartisan and sweeping support of S.B. 919 shows that government and the private sector can make meaningful progress when each side is committed to the cause – and we hope that other states who are considering regulating the franchise model look at this bill as a place to start.?