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Tuesday, Feb 27, 2024

Bill Has Franchise Owners Furious

A bill making its way through the California legislature has upset the owners of fast-food restaurants.

AB 257, also known as the FAST Act, would, among other things, create an 11-member panel that would impose new rules on fast-food restaurants and institute a joint and several liability clause in franchisor contracts with their franchisees, effectively dismantling the franchisee business model in California.

Ron Ross, the owner of four Wendy’s restaurants in the Los Angeles area, called the bill “a solution in search of a problem.”


“There’s just not enough of a problem that we need this type of aggressive bill that would dramatically change how we do business,” said Ross, who has been a franchise owner for 30 years.

Opponents of the bill came out in force in Sacramento on Wednesday, meeting with state lawmakers to make their views known. They have formed a campaign named Stop AB 257.
Ross said that there were two provisions in the bill that would be non-negotiable: the 11-member panel to oversee restaurant operations and the joint and several liability clause in franchisor contracts.

“You hate to take a stance where you say there’s no way we’re going to compromise, but those two things you cannot compromise on,” Ross added. “We cannot have an unelected 11-member panel deciding how we work, and also the joint severability is just untenable. Our hope is to get it stopped completely.”

A similar bill came up a year ago and the franchisees were able to defeat it in the Assembly, Ross said.

The panel could force restaurant operators to set wages, schedules and work rules, among other things. The joint and several liability portion would make the franchisor legally responsible for the actions of the franchisee, effectively ending the usual franchise business relationship, and it could ultimately result in franchisees becoming employees of a corporation instead of being independent, small-business owners.

The Stop AB 257 campaign on Wednesday released a report from the UC Riverside Center for Economic Forecast and Development that concluded passage of the bill would result in 20 percent higher food costs at restaurants.

Christopher Thornberg, director of the center, said that historic inflationary pressures have hit many parts of the economy, putting tremendous stress on low-income households.
As for how the bill will affect his stores, which are located in Monrovia, Southgate, Pico Rivera and Woodland Hills, Ross said it would definitely impact wages and could possibly affect employee scheduling. The panel could also order restaurants to hire security guards to deal with issues caused by homeless individuals in the city of Los Angeles, he said.

“There is talk about the grease that we exhaust into the air,” Ross added. “There is no limit to what they can rule on.”

The bill is based on a faulty narrative that franchise owners misuse and abuse their employees, Ross continued. There are bad owners out there, but the existing laws on the books should be enforced against them, he said.

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