On Sept 29, California Governor Jerry Brown vetoed proposed franchise legislation which would have substantially altered the existing statutory scheme governing the relationship between franchisors and franchisees in California.

The proposed legislation, known as SB 601, would have changed the standard for termination of franchisees from “good cause” to “a substantial and material” breach of the franchise agreement, as well as greatly strengthened remedies for disgruntled franchisees.

The legislation, opposed by franchisors due to the vagueness of the standards it contained, generated concern that its practical effect would be to generate more litigation, thus undermining a vital part of California’s economy.

Governor Brown’s veto message criticized the termination standard in the bill as being “new and untested” and “would significantly impact California’s vast franchise industry that relies on the certainty of well-settled laws.”  He encouraged the business interests involved to attempt to work out a more collaborative effort at reform legislation.