IFA Applauds Signature of California Legislation to Improve Franchise Sales Disclosure

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Consistent with IFA’s “Responsible Franchising” principles, new common-sense law extends disclosure requirements to third-party franchise sellers in California, can serve as a model for other states

WASHINGTON – The International Franchise Association (IFA) today applauded signature of California Senate Bill 919, bipartisan legislation extending disclosure requirements to third-party franchise sellers such as brokers, broker networks, and franchise sales organizations.

“By improving information available to prospective franchisees during the presale process, the legislation strengthens the foundation on which the franchise relationship begins,” said Matt Haller, IFA President and CEO. “We were honored to lead the discussion and debate with all the franchise stakeholders, and we hope this law will serve as a model for Responsible Franchising in other states. IFA thanks the bipartisan group of lawmakers who made S.B. 919 a reality, and the governor for signing it into law.” 

Introduced by California State Sen. Thomas Umberg (D-34) in January 2024, S.B. 919 builds on IFA’s longstanding principles of Responsible Franchising by working to strengthen the franchise relationship where it begins—at the start of the franchise sales process. IFA, along with the Coalition of Franchisee Associations (CFA) and American Association of Franchisees & Dealers (AAFD), has advocated for the legislation since its introduction, including testimony before the California Senate Banking Committee. Further, IFA has announced its support of model legislation by the North American Securities Administrators Association (NASAA) that would provide registration and disclosure requirements for third-party franchise sellers to establish greater transparency in the franchise sales process.

Specifically, S.B. 919 amends the California Franchise Investment Law (CFIL) to add annual registration and pre-sale disclosure requirements for franchise brokers, including franchise broker networks, franchise brokers, and franchise sales organizations, including:  

  1. File an annual registration similar to what currently is required in New York and Washington and pay the applicable fee.
  2. Deliver to prospective franchisees a brief disclosure document that includes: (1) information about third party franchise sellers generally and questions a prospective franchisee may ask their third party franchise seller; (2) contact information and state of formation (if applicable) of third party franchise seller; (2) professional experience (past five years) and any certifications or continuing education completed; (3) litigation history; (4) types of services performed and general compensation structure; (5) industries represented and number of brands within each industry; and (6) brands for which franchises were sold during the prior year, including the total number of units sold for each brand. 

As IFA Vice President of Government Relations and Counsel Jeff Hanscom told the Franchise Times, “The bill came out of a working group within the IFA where we worked with legislators, franchisors, franchisees and the broker community. The entire goal is to ensure that everybody has transparency in the sales process. Predominantly, it’s aimed at prospective franchisees so they know everything when going into this process.” 

S.B. 919 passed the state Senate in May in a 37-1 vote, while the California Assembly approved the bill unanimously, 75-0, in August. The law would take effect in July 2026. 

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