SACRAMENTO – Earlier this week, California Governor Jerry Brown vetoed a bill limiting the control that franchisors like McDonalds and Burger King may exercise over franchisees. The bill, S.B. 610, would give franchisees greater freedom to sell or transfer their franchises to third parties. It would also change the standard under which a franchisor might terminate a franchise contact, from “good cause” to “substantial and material breach” of contract.

In his veto statement, Gov. Brown said he was vetoing the bill because the “substantial and material breach” language was “new and untested.” Brown said he was open to reforming the state’s franchising law “to give more protections to franchisees if there are indeed unacceptable or predatory practices by franchisors.” But he said he would need “a better explanation of the scope of the problem.” He also said he preferred “a more collaborative solution,” an acknowledgement of the polarized debate on the subject.

Steve Caldeira, president of the International Franchise Association, which represents franchisors, applauded Brown’s decision, saying the bill "would have created unnecessary and unclear new regulations on franchisees across the state and would have also led to an excess of unnecessary and costly litigation in California.”

But Robert Purvin, chairman of the American Association of Franchisees and Dealers, assured his organization’s supporters that franchisees who sought passage of the law have “gained a voice and we will be back."