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:

This story was originally published September 30, 2014 at 12:00 AM with the headline "Gov. Jerry Brown vetoes franchise bill."