According to Los Angeles Times, fast food workers at McDonald’s restaurants in Los Angeles, Oakland, Sacramento, San Diego and San Jose plan to quit their jobs on November 9 to support the passage of California Assembly Bill 257, on Fast Food Restaurant Responsibility and Restoration Act, also known as Fast payback law. The law was originally introduced by Assembly Member Lorena Gonzalez in January 2021, approved by two Assembly committees in April 2021, defeated by the Plenary Assembly in June 2021, but due for reconsideration in January 2022.
As drafted, AB 257 would establish a Fast Food Restaurant Council (Council) which would have 11 members appointed by the Governor, the Speaker of the Assembly and the Rules Committee of the Senate, each for one term. of four years, to regulate the operation of independent establishments and franchises. fast food in California. Only four of the 11 committee members would be required to have fast food restaurant experience.
The Council would establish standards for minimum wages, maximum hours and other working conditions for employees of fast food restaurants, fast food franchisees and fast food franchisors with 30 or more restaurants in the United States. of the Act, fast food franchisors should ensure that their franchisees comply with certain laws on employment and the public health and safety of workers and would be jointly and severally liable for any penalties or fines imposed due to violations of the Act. these laws by their franchisees.
Under AB 257, fast food franchisees would be allowed to take legal action against their franchisors to challenge the terms of their franchise agreements and their compliance with certain laws. Franchisors would be jointly and severally liable if the terms of a franchise agreement were to be an important factor in the liability of franchisees. Waivers and indemnification agreements granted by fast food franchisees in favor of their franchisors would be contrary to public order, void and unenforceable.
AB 257 appears to be invasive anti-franchisor legislation that would be a disaster for California fast food franchisors, franchisees and their employees if passed by the assembly. It is likely that after the switch, fast food franchisors would scale back their franchising operations in California, costing state tax revenues and losing franchise and employment opportunities.
Franchising is already regulated by federal and state laws and provides new and existing franchisees with adequate protection:
- The Federal Trade Commission Franchise Rule (16 CFR § 436) prohibits deceptive and unfair practices in the sale of franchises. The FTC rule requires the pre-sale of a Franchise Disclosure Document (FDD) to franchise applicants. An FDD must answer 23 questions and dozens of sub-questions about the franchisor and the franchise business in a “plain English” narrative format to adequately educate franchise applicants about the risks inherent in a franchise opportunity.
- Applicable state franchise laws, including California law, regulate the initial registrations of FDD and renewal of registration, the disclosure of FDD prior to sale similar to the requirements of the FTC rule, and the after-sale maintenance of the franchisor / franchisee relationship such as defaults, terminations, transfers and renewals. If a state does not have its own franchise laws, the FTC rule governs franchising in that state.
The bill is supported by the Service Employees International Union (SEIU). The International Franchise Association (IFA), which protects and promotes franchising by educating lawmakers and the public about the franchise business model, remains firmly opposed to AB 257 and will work with the California Restaurant Association and others who are oppose it.