Senate Bill 919 Introduces Comprehensive Oversight for Third-Party Sellers, Effective 2026
The International Franchise Association has praised California legislators’ passage of California Senate Bill 919, which expands the disclosure requirements for third-party sellers of franchises. The bill, taking effect July 2026, amends the California Franchise Investment Law to add annual registration and presale disclosure requirements for third-party sellers including franchise brokers, broker networks and franchise sales organizations.
Third-party sellers will have a hand in the launch of many new franchises this year, with the number of franchise businesses expected to increase by more than 15,000 units in the United States, according to the IFA’s 2024 Economic Outlook report for 2024. Assuming that the report’s projection pans out, the total of U.S. franchises will reach approximately 821,000 this year, the IFA report said, reflecting an increase of 1.9% over 2023.
‘Oversight and Disclosures’
An IFA news release quoted the bill’s author, Sen. Thomas J. Umberg, a Democrat from Santa Ana, as saying, “California has completed some important work in recent years to ensure transparency and consumer protections for residents looking to invest in franchise operations. S.B. 919 is the next step forward in that process and will ensure that third-party franchise brokers, an important piece of this economy, are subject to similar oversight and disclosures. We’re working together to help our local city economies thrive while supporting small business owners and consumers alike.”
The bill, which the California Assembly recently passed 75-0, had been approved by the state’s Senate in May. Now it’s up to Democratic Gov. Gavin Newsom to sign the bill into law.
What Senate Bill 919 Will Do
Senate Bill 919’s proposed amendments to the California Franchise Investment Law would require third-party franchise sellers to do two key things: 1) file an annual registration similar to what currently is required in New York and Washington and pay the applicable fee; and 2) provide franchisee candidates with a brief disclosure document. That disclosure document will contain the following:
- General information about third-party franchise sellers. It also outlines questions that a prospective franchisee may ask their third-party franchise seller.
- The contact information and state of formation (if applicable) of the third-party franchise seller.
- The third-party seller’s professional experience covering the past five years, along with any certifications or continuing education that has been completed.
- The seller’s litigation history.
- The types of services she or he has performed and the seller’s general compensation structure.
- The industries that the seller represents and the number of brands within each industry.
- The franchise brands that the seller sold during the previous year as well as the total number of units that he or she sold during that period.
Reaction from Franchise Trade Groups
The IFA, with additional support coming from the Coalition of Franchisee Associations (CFA) and American Association of Franchisees & Dealers, had been advocating on behalf of the bill since Umberg introduced it in January 2024. The trade groups have maintained that the legislation will enhance the franchise relationship by providing franchisee candidates with better information.
“A bedrock of IFA’s mission is promoting due diligence and transparency in the presale process,” IFA President and CEO Matt Haller stated in the news release. He noted “the increasingly prevalent role of third-party sellers in recent years” and called the bipartisan consumer protection bill a “groundbreaking improvement in consumer protection law.” Haller further suggested it may become a model for other states. Also in the news release, Rob Branca, IFA Board member, a CFA Board member and franchisee chair of the Inspire Brands and Dunkin’ Government Affairs Committees, called S.B. 919’s new regulations “long past due.”
