Franchises.

(1) Existing law, the California Franchise Relations Act, sets forth certain requirements related to the termination, nonrenewal, and transfer of franchises between a franchisor, subfranchisor, and franchisee, as those terms are defined. Existing law provides that the act applies to any franchise when either the franchisee is domiciled in this state or the franchised business is or has been operated in this state. This bill would additionally specify that any provision of a franchise agreement requiring the franchisee to waive specified provisions of law are contrary to public policy and are void and unenforceable. Existing law authorizes a franchisor, upon the termination or nonrenewal of a franchise, to offset any amounts owed to the franchisee against any amounts owed by the franchisee to the franchisor. This bill would recast that provision to authorize the offset only if the franchisee agrees to the amount owed or the franchisor has received a final adjudication of any amounts owed. Existing law requires a franchisee, before the sale, assignment, or transfer of a franchise, as specified, to another person, to notify, in writing, the franchisor of the franchisee's intent to sell, transfer, or assign the franchise. Existing law requires this notice of transfer to include specified information and meet certain criteria. This bill would prohibit a franchisor from modifying a franchise agreement, or requiring a general release, in exchange for any assistance related to a declared state or federal emergency. This bill would limit the application of the above changes to a franchise agreement entered into, amended, except as specified, or renewed on or after January 1, 2023, or to franchises of an indefinite duration that may be terminated without cause. (2) Existing law, the Franchise Investment Law, provides that an offer or sale of a franchise is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or, if the franchisee is domiciled in this state, the franchised business is or will be operated in this state. This bill would instead provide that an offer or sale of a franchise is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or if the franchise business is intended to or will be operated in this state. Existing law authorizes the Commissioner of Business Oversight to summarily issue a stop order denying the effectiveness of or suspending or revoking effectiveness of any registration if the commissioner finds certain things, including, but not limited to, that there has been a failure to comply with the Franchise Investment Law or the rules of the commissioner pertaining to that law. Existing law renamed the Department of Business Oversight as the Department of Financial Protection and Innovation and renamed the commissioner of the department as the Commissioner of Financial Protection and Innovation. This bill would clarify that the Commissioner of Financial Protection and Innovation has the authority described above, consistent with the renaming of the Department of Business Oversight to the Department of Financial Protection and Innovation. The bill would also authorize the commissioner to summarily issue a stop order if the commissioner finds the franchisor's method of business includes or would include activities that are or would be illegal where performed or if the commissioner finds that the franchise agreement contains a provision that is contrary to law. Existing law prohibits a person from offering or selling any franchise in this state unless the offer has been registered, as specified. Existing law prohibits the sale of a franchise in this state that is subject to registration without first providing certain information to the prospective franchisee. Existing law makes it a crime to, among other things, willfully violate any provision of the Franchise Investment Law. This bill would require a prospective franchisee seeking to buy an existing franchise, all or substantially all of the assets of an existing franchise business, or an interest in an existing franchise business to provide specified information and documentation to the franchisor. The bill would also require the franchisor to notify the prospective franchisee in writing of any additional information or documentation necessary to complete the application, as specified, and require the franchisor to notify and provide certain information to the prospective franchisee of the decision to approve or disapprove the application, as specified. The bill would make it a violation of the Franchise Investment Law for any franchisor, directly or indirectly, through any officer, agent or employee, to violate these provisions. By expanding the scope of a crime, this bill would impose a state-mandated local program. Existing law prohibits a person from effecting or attempting to effect a sale of a franchise, except as specified. Existing law, the Unruh Civil Rights Act, provides that all persons within the jurisdiction of the state are entitled to certain protections regardless of certain specified characteristics. This bill would prohibit a franchisor from refusing to grant a franchise or refusing to provide financial assistance to a franchisee or prospective franchisee based solely on those characteristics, as specified. Existing law provides that a person who violates certain provisions of the Franchise Investment Law shall be civilly liable, as specified. Existing law provides that, except as explicitly provided, no civil liability in favor of any private party shall arise against any person by implication from or as a result of the violation of any provision of this law or any rule or order. This bill would remove the provision protecting against civil liability by implication from or as a result of the violation of any provision of this law or any rule or order. Existing law provides that any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of the Franchise Investment Law or any rule or order under that law is void. This bill would specify that disclaimers of representations and similar disclaimers are contrary to public policy and are void. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.