California governor vetoes bill to protect franchisees' investments

Reuters News
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Posted: Sep 30, 2014 11:56 AM

LOS ANGELES (Reuters) - California Governor Jerry Brown late on Monday vetoed a bill that would have helped franchisees recoup some of their business investments when a franchisor wrongly terminates their relationship.

The legislation, known as SB 610 and the subject of a fierce lobbying battle between the opposing sides, would have changed the standard required to end a franchise agreement from "good cause" to a "substantial and material breach".

The bill also would have required a franchisor that terminates an agreement without a material breach to compensate the franchisees for the fair value of their businesses or to provide them an opportunity to sell.

At present, California law only requires franchisors that terminate or fail to renew a franchise agreement to offer to repurchase a franchisee's inventory.

"While the 'good cause' standard is common and well understood, the standard provided in this bill is new and untested," Brown said in his veto message.

Brown said the opposing sides in the battle over the legislation held polarized positions. "It is in the best interest of all that a concerted effort be made to reach a more collaborative solution," he added.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Lisa Von Ahn)