As our lawmakers in Sacramento jostle to save the world through a never ending stream of proposed regulations and legislation, I am often perplexed by this question: Is our state that bad off that every year we are required the introduction of 3,000 proposed new laws?
Aside from the proposals that get the most amount of news such as laws to increase the minimum wage or create a new regulatory commission for the legalization of marijuana, most bills are hidden and cater to special interests.
One in particular has peaked my interest, Assembly Bill 525 (Holden), which would loosen the relationship between a franchise and its franchisees. In doing so, the measure would water down brand standards we have grown accustomed in some of our favorite stores and restaurants.
As a former insurance broker, I learned that providing coverage to a business can be a complicated endeavor. This is especially true when the relationship involves more than one business. When this is the case, the business relationship must be spelled out clearly. There can be no ambiguity or uncertainty.
Currently, a franchising company provides a set structure to any person looking to start-up a franchise business. They provide training, products, financial support and a marketing and solid business plan as a blueprint for success.
This model has helped countless Latinos in California start their own businesses and achieve the American Dream.
If the new franchisee decides to cut corners or compromise the quality products and services, the franchisor can cite the franchisee for these violations, ask them to make corrections and get operations back on track. Should the issue persist, the franchisor must have the power to terminate the relationship in order to protect the overall brand.
There currently exists a tremendous amount of laws and procedures dealing with franchise disagreements and the potential dissolving their relationship; these are very rare cases but they do occur. In most instances, the issues are resolved because at the end of the day, each party has a vested interest in wanting the franchise to succeed.
Enter AB 525, a veritable bull in the china shop. The measure essentially rewards bad behavior by adding unreasonable protections for franchisees who break from the established franchise model and contractual relationship.
AB 525 would create an environment and major loophole in which a franchisee would be allowed to hold an entire franchise hostage through litigation. As it stalls, the offending franchisee would be free to operate in a way that compromises the brand. This hurts businesses because one bad experience at one franchise will be associated with franchisees run by their colleagues.
The franchise system is set up so that customers can expect a certain quality of product and level of service. When you visit a Jiffy Lube, there is peace of mind knowing that each employee has been certified, trained and knows where to find the oil drain plug. There is a standard we expect to find – and trust. I know that the burger I purchase at Carl’s Jr. in San Diego is the same quality as the one purchased in Fresno or Redding. I shouldn’t have to worry about whether one restaurant will be serving smaller portions to increase profit or making me endure long wait times because that franchisee wants to cut back on necessary number of employees.
Last year, Governor Jerry Brown vetoed similar legislation. He expressed concern that by lowering the threshold of the relationship between the franchisor and franchisee, the legislation created “unnecessary and unclear” new regulations for franchising across the state that would lead to costly litigation.
The brand of the company, the training, the quality of the products and the hard work from franchisees and their employees to stick to their contracts make for a successful business. That success is important than profits for franchisees and franchisors. Unless the legislature addresses major problems with AB 525, consumers will be the ones who get hurt.
Sandra Carnet-Gutierrez is a former insurance broker and is the marketing manager for Bella Bardot. Sandra currently lives in Downey.