We previously reported on the proposed amendments to the California Franchise Relations Act (CFRA) in a Sept. 28 blog post. The proposed bill was signed into law by the governor on Sunday, Oct. 11, and will take effect Jan. 1, 2016.
The bill revises the previous provisions of the CFRA regarding termination, introduces a restriction on a franchisor’s ability to prevent transfers by a franchisee and broadens the franchisor’s obligation to repurchase inventory. Critics of the bill are concerned that it will turn franchisors away from California, while the bill’s proponents laud it as strengthening franchisee rights.
Over the past several years, California has severely restricted the permissible scope of non-competition covenants, and many California courts have been liberal towards franchisees. Yet, franchisors continue to sell franchises in the state. Whether the amendments to the CFRA are the drop that spills the glass remains to be seen. Only time will tell about the real impact of the amendment.