California's Franchise Sales Disclosure Law has been Made Official

In a recent development, the International Franchise Association (IFA) has expressed support for the signing of Senate Bill 919 into law by California Gov. Gavin Newsom. This new law introduces additional disclosure requirements for third-party franchise sellers, such as franchise brokers, broker networks, and franchise sales organizations. These requirements are set to come into effect in July 2026.

According to a report from digital marketing agency HigherVisibility, the U.S. sees a new franchise opening its doors approximately every eight minutes during each business day. With 10.5% of U.S. businesses being franchises, the new law’s presale disclosures aim to assist franchisee candidates in making informed decisions when choosing a brand, whether regional or global, that aligns with their interests and financial considerations. Ultimately, this increased transparency is expected to boost business success rates for franchisees.

Key provisions of Senate Bill 919 include an annual registration requirement for third-party franchise sellers, along with the payment of a fee. Prospective franchisees will also receive a brief disclosure document containing general information about third-party sellers, their contact details, professional experience over the past five years, litigation history, compensation structures, industries represented, and brands sold in the previous year.

The IFA has been a strong supporter of the new law, citing its alignment with responsible franchising principles outlined in guidelines released by the organization earlier this year. IFA President and CEO Matt Haller emphasized the importance of providing prospective franchisees with accurate and comprehensive information during the presale process, stating that it lays the foundation for a successful franchise relationship. The IFA hopes that this legislation will set a precedent for responsible franchising practices in other states.

Jeff Hanscom, Vice President of Government Relations and Counsel at the IFA, highlighted the collaborative efforts between the association, legislators, franchisors, franchisees, and the broker community in developing this legislation. The goal is to ensure transparency in the sales process and empower all parties involved with comprehensive information.

Democratic State Sen. Thomas Umberg, the bill’s sponsor, praised the passage of Senate Bill 919, emphasizing the importance of protecting Californians interested in investing in franchises. The bill received overwhelming support in both the state Senate and Assembly, demonstrating the broad consensus on the need for enhanced disclosure requirements in franchise sales.

In conclusion, the new law in California represents a significant step forward in promoting transparency and accountability in the franchise industry. By setting out clear disclosure requirements for third-party franchise sellers, prospective franchisees can make more informed decisions when considering franchise opportunities. This development has been well-received by industry stakeholders, including the IFA, and sets a positive example for responsible franchising practices nationwide.