California Senate Bill 919 (S.B. 919), signed into law in 2024, marks a significant expansion to the California Franchise Investment Law (CFIL) and establishes new regulatory requirements for third-party franchise sellers.[1] This law mandates third-party sellers, including franchise brokers, broker networks, and franchise sales organizations, register annually with the state and comply with presale disclosure obligations.
Under the new law, each third-party franchise seller must submit a registration with an associated fee and provide a detailed disclosure document to prospective franchisees. The disclosure document includes essential information designed to ensure that franchisees understand the roles, services, and compensation structures of these third-party sellers. Specifically, the document must contain the seller’s contact information, recent professional experience, relevant certifications or continuing education, litigation history, types of services performed, compensation structure, industries represented, and a summary of franchisees sold in the past calendar year.
This new legislation further includes guidelines encouraging franchisees to ask critical questions when dealing with third-party sellers, helping them better understand each seller’s involvement and the scope of their advisory role. By codifying these requirements, S.B. 919 aims to prevent misrepresentation in the franchise sales process, ultimately promoting a more transparent marketplace for franchise investments in California.
S.B. 919’s implementation underscores California’s commitment to strengthening franchisee protections by regulating intermediary roles that previously operated with minimal oversight. Now fully enacted, the law places California at the forefront of franchise regulation and sets a benchmark for transparency and accountability in franchise transactions across the U.S.
[1]CA LEGIS 518 (2024), 2024 Cal. Legis. Serv. Ch. 518 (S.B. 919) (WEST). Text of the Legislation is available at: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB919
Ron Gardner, IDI Country Expert for franchising in the U.S.A.
