The AAFD Has Endorsed the State Bar’s Recommendations.

April, 2013. The California State Bar, on the recommendation of the Franchise Law Subcommittee, has recommended that the California Department of Corporations amend its regulations to make it easier for franchisors to negotiate the terms of franchise agreements in California.

Unlike the Federal Trade Commission Rule and all other states that regulate the sale of franchises, California has long required franchisors to disclose information about contract terms they may have negotiated with specific franchisees (who may have unique circumstances or value).  The California requirement has frequently chilled the willingness of franchisors to negotiate with prospective California franchisees.

The proposed revisions to California’s regulations would remove the need for franchisors to disclose negotiated franchise agreements, but requires franchisors to disclose to prospective franchisees whether such negotiations may occur and to keep records of negotiated agreements.

The AAFD has long urged California to remove its restrictions, which have consistently inhibited negotiated franchise agreements in California.  The AAFD fully supports this proposed regulatory amendment and commends the California Bar and the Franchise Law Committee for this effort.

AAFD Chair, Robert Purvin, serves on the Franchise Law Subcommittee, and has voted in favor of the Bar’s recommendations.  Although the Department has not yet acted on this proposal, it is expected that the proposal will be well received.  This is a significant improvement for franchisees and franchisors in California.