August 29, 2022

AB 257 Designed to Discriminate Against Franchise Business Model, Reckless Bill that Will Increase Food Costs 20% For California Restaurant Goers

WASHINGTON, DC – International Franchise Association President and CEO Matthew Haller today released the following statement urging Governor Newsom to veto Assembly Bill 257, the so-called Fast Recovery Act, after the Senate’s passage today:

“AB 257 is a discriminatory measure designed to target the franchise business model. The bill creates an arbitrary standard for one sector of workers while punishing small business owners and their customers. Franchising has opened the door for hundreds of thousands of entrepreneurs to pursue their dreams and millions of workers to establish a career, but this bill stands to break all that down while raising prices for Californians and forcing restaurants to close their doors. Gov. Newsom should stand up for local businesses, the people of California, and responsible government, and veto this legislation.”

AB 257 is also 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. But a recent analysis suggests this assertion is categorically false and not supported by the state’s own data.

Less than one-third of Californians support AB 257 according to new research, which is estimated to increase food prices 20% for Californians while harming local businesses.

In addition, the Employment Policies Institute released a new survey of U.S. labor economists, which found that 83 percent oppose AB 257. The survey reflects economists' deep concerns about the negative impacts of this bill on fast-food industry growth, jobs, and price inflation.

California’s small businesses share their concerns:

“Even during this time of historic prices, we have resisted price increases on our customers because we know they can’t afford it,” said Jesse Lara, El Pollo Loco franchisee in Southern California. “Governor Newsom knows that if AB 257 becomes law, small businesses like mine will face no choice but to raise prices to stay afloat or be forced to shut our doors.”

“AB 257 hurts local small businesses like mine while raising prices for local families and visitors to our state,” said Alex Johnson, owner of 11 franchised restaurants in California. “During the highest inflation in 40 years, this bill harms everyone from local businesses and their employees to the millions of Californians who rely on quick-service restaurants each week. Governor Newsom must veto this bill—it’s not the way to help workers, consumers or businesses thrive.”

“Our customers come to us because we’re affordable,” explained Sanna Shere, a Burger King franchisee based out of southern California. “Californians are already suffering under the weight of inflation and the FAST Act will make it harder to live, work, and own a business in the state. By signing this bill, Governor Newsom will effectively dismantle California’s franchising business, which has afforded so many women and minority entrepreneurs a higher rate of business ownership across the state.”

This week, the International Franchise Association and the California Restaurant Association launched ads across California to highlight the negative economic impact of AB 257 on California families and restaurants, while encouraging Governor Newsom to veto AB 257.

The coalition to Stop AB 257 said:

“Reckless costly legislation that hits working families during record inflation is not the way to protect anyone—consumers, workers, or small businesses. Clearly, the legislature is out of touch with the financial realities across California, opting to pass this 20 percent food tax on to California counter service diners. Governor Newsom has a chance to do right by all and veto this bill. His own Department of Finance opposed AB 257, saying it would increase costs without solving the problem it claims to address.

“Skyrocketing costs for food, gas, and rent are crushing consumers and local restaurants alike. Now the legislature is increasing food prices to fund an unelected Council, bringing special interests into the state government. The council usurps power from state agencies who are underfunded and under-resourced to protect workers.”

AB 257 Isn’t Supported by Californians, Economists, or the Data

Just today, 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 and to urge legislators to vote no on AB 257. 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 would 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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About The International Franchise Association:

Celebrating over 60 years of excellence, education, and advocacy, the International Franchise Association (IFA) is the world’s oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations, and educational programs to protect, enhance and promote franchising and the approximately 775,000 franchise establishments that support nearly 8.2 million direct jobs, $787.7 billion of economic output for the U.S. economy, and almost 3 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees, and companies that support the industry in marketing, law, technology, and business development.

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