Gov. Newsom Sides with Special Interests over Local Businesses, California Consumers

September 05, 2022

Signs AB 257 into law, hurting small businesses, consumers, and California communities alike

WASHINGTON, DC – Following California Gov. Gavin Newsom’s signature of AB 257, or the FAST Recovery Act, the International Franchise Association (IFA) today released the following statement. The legislation, which singles out the quick-service restaurant industry and the franchise business model, stands to increase prices as much as 20% at impacted restaurants and harm local businesses, without improving existing worker protections in the state.

“By signing this bill, Gov. Newsom is siding with special interests rather than the people and small businesses of California,” said IFA President and CEO Matthew Haller. “This bill has been built on a lie, and now small business owners, their employees, and their customers will have to pay the price. This bill is a fork in the eye to franchise owners and customers at a time when it hurts most. IFA continues to hear over and over how local franchises do not know how they will be able to make it once this bill goes into effect. Underrepresented communities will be hit hardest. 

“Franchising is one of the greatest tools for entrepreneurial advancement – uplifting individuals and communities around the nation. Franchises already pay higher wages and offer more opportunity for advancement than their independent counterparts, and this bill unfairly targets one of the greatest models for achieving the American Dream and the millions of people it supports.

“The FAST Act was designed to hurt the franchise business model in California, and that is what it will do. IFA will not stop fighting to ensure other states won’t suffer from the harm that California has started.”

AB 257 is based on the flawed premise that working conditions are worse in counter-service restaurants than other food sector establishments, which is why they are being singled out by this bill. However, an analysis of the state’s own data suggests this assertion is categorically false.

Recent research from UC Riverside shows that AB 257 could increase prices as much as 20 percent for California restaurant goers. Given that AB 257 will increase costs for consumers and harm local businesses, less than one-third of Californians support this bill. Moreover, the Employment Policies Institute released a new survey of U.S. labor economists, which found that 83 percent oppose AB 257 due to deep concerns about the negative impacts of this bill on fast-food industry growth, jobs, and price inflation.

In addition, last week, the U.S. Black Chambers, Inc. (USBC), the National Asian/Pacific Islander American Chamber of Commerce and Entrepreneurship (National ACE), and the National LGBT Chamber of Commerce (NGLCC), in partnership with the California Black Chamber of Commerce and the CalAsian Chamber of Commerce, sent a letter to members of the senate to express their concerns regarding the bill. As these organizations highlight in their letter, “not only do franchise models provide minority entrepreneurs with uncharted economic opportunity, but the franchise model represents a key pathway towards achieving the American Dream while also generating employment, revenue, and opportunity for their immediate communities.” This bill will cause irreparable harm to minority-owned companies, their operators and families, and the very workers the backers of this bill seek to support.



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