Capitol Alert

Gov. Jerry Brown vetoes franchise bill

Siding with corporate chain stores that warned of degraded service, Gov. Jerry Brown on Monday vetoed a bill giving franchise owners more power in business transactions.

The legislation sought to alter the relationship between parent companies and the franchisees who operate individual businesses, with supporters saying the bill would reduce franchisors’ authority to rigidly dictate the terms under which franchisees operate. In his veto message, Brown noted that the two sides were far apart in the debate over the bill and suggested “it is in the best interest of all that a concerted effort be made to reach a more collaborative solution.”

Proponents, including the American Association of Franchisees and Dealers and the California Labor Federation, said it is too easy for franchisors to cancel contracts or block sales of franchises. Among other provisions, Senate Bill 610 would have raised the standard for refusing to renew a contract from “good cause” to “substantial and material breach of the franchise agreement.”

Brown said he had doubts about the change: “While the good cause standard is common and well understood, the standard provided by this bill is new and untested,” he wrote.

The bill narrowly passed the Legislature, surmounting criticism from opponents who said the bill was vaguely worded and warned it would undercut a business model promising consistency across various far-flung locations. An organization representing franchisors launched an advertising campaign warning that the bill would “radically change the franchise business model” and endanger health and safety.

One potentially affected company is Jack in the Box, a San Diego-based fast-food chain in which Brown’s wife owns more than $1 million worth of stock, according to the governor’s most recent filing on his personal worth.

Brown said he was open to changing the law “to give more protections to franchisees if there are indeed unacceptable or predatory practices by franchisors. I need, however, a better explanation of the scope of the problem so I am certain the solution crafted will fix those problems and not create new ones.”

The veto was among dozens of bill actions Brown announced Monday. The Democratic governor faces a midnight Tuesday deadline to complete his work on bills lawmakers sent him before adjourning last month. Other actions included:

• Approval of Senate Bill 850 to allow up to 15 community colleges to launch four-year bachelor’s degree programs in vocational fields. While 21 other states offer community college baccalaureates, California’s colleges have traditionally been the domain of transfer students and career technical education, granting two-year associate degrees, as established more than 50 years ago in the Master Plan for Higher Education. SB 850 will allow colleges to experiment with four-year degrees. The pilot program is set to begin no later than the 2017-18 academic year and end in 2024.



• A veto of a bill granting California’s attorney general more power to review nonprofit hospital sales, including the ability to retroactively amend the terms of the sales agreements to include new requirements. In his veto message, Brown said he was rejecting Senate Bill 1094 to allow for new regulations around such sales to take effect.



• Vetoes of several measures to restore aspects of the state’s former redevelopment agencies, which lawmakers eliminated in 2012. The vetoed measures included Assembly Bill 2280, which supporters said would create a way to pay for civic improvements in the most disadvantaged parts of the state.



• Vetoes of tax-credit measures Monday that supporters said would encourage the preservation of historic structures and attract investment to poor areas. “I certainly endorse programs that result in private investments to help low income areas, but a bill to spend this much should be considered with other priorities during the annual budget,” Brown wrote in his veto message for Assembly Bill 1399, which he said would cost up to $200 million.



• Approval of a new loan program for undocumented students in California’s public universities. Senate Bill 1210, by Sen. Ricardo Lara, D-Bell Gardens, will make available $9.2 million for University of California and California State University campuses to administer loans to students who are in the country illegally. These students, who are ineligible for federal financial aid and most private loans, often face a gap in funding their education – an estimated $5,000 to $6,000 at UC and $3,000 at CSU, according to Lara’s office.



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