Taking a closer look at legislation authored by California State Assemblymember Chris Holden and much more
Each month, this special feature section explores AAHOA’s advocacy efforts, while bringing attention to pro-industry voices, highlighting industry-specific legislation, recapping past AAHOA outreach events, and much more.
In an ongoing effort to introduce AHOA Members to champions in government who are making efforts to protect the rights of franchise owners, this month we feature California Assemblymember Chris Holden (D-Pasadena). In 1970, California had the first state franchise law, the California Franchise Investment Law (CFIL), signed into law by then-Governor Ronald Reagan. A decade later, the California Franchise Relations Act (CFRA) followed. These laws remained largely unchanged until 2015, when AB-525, authored by Assemblymember Holden, was signed into law. Then, in 2022, Assemblymember Holden again authored a franchise bill, AB-676, which updated both the CFIL and the CFRA, was signed into law by Governor Newsom, and became effective January 1, 2023. This interview should give you a little more insight into Assemblymember Chris Holden, and why protecting franchisees is important to him.
YOUR FATHER WAS A POLITICIAN, INCLUDING SERVING IN THE STATE SENATE. DID YOU GROW UP THINKING YOU WOULD GO INTO POLITICS?
Growing up in Pasadena and seeing my father, Nate Holden, serve in the State Senate and on the Los Angeles City Council, showed me how to take initiative and find steps toward implementing change. He modeled what a true public servant does, and his life is a great example for how we can best serve the world around us. I believe that public service does not begin after winning an election but, instead, starts by recognizing the intricate balance between knowing the needs of our community and bridging the gap to create accessibility to resources.
Having played basketball in high school and in college at San Diego State University, I remember being a young person considering my future. Basketball was impactful for me during my youth, and its benefits carried on far beyond my graduation throughout my personal and professional life.
After graduating college with a degree in business, I had the opportunity to work at a juvenile detention center. This experience inspired me to devote my life to public service and help improve the quality of life for those less fortunate. I decided to run for office and was elected to the Pasadena City Council as the youngest City Councilmember at the age of 28. During my tenure, I also became the second African American mayor and served on the Council for almost 24 years.
I learned life lessons and gained skills that have taught me to listen to the needs of my community. Today, as a legislator in the California State Assembly, my work continues and I remain committed to find solutions that will make positive contributions to society as a whole.
FOR A SHORT TIME, YOU WERE A SUBWAY FRANCHISEE. WHAT WAS YOUR EXPERIENCE AS A FRANCHISEE AND WHAT DID THAT DO TO YOUR OUTLOOK ON THE INDUSTRY?
Often times, franchisees believe they’re partnering with a corporation that will work as hard as they do to make the franchise a success. Franchisees invest hundreds of thousands of dollars into their business. Good franchisees invest even more to stay in compliance with the franchisor’s demands.
What isn’t understood, however, is the amount of power that franchisors wield over the success or failure of the franchisee’s business. If they lose their business, they lose their job and the money they spent keeping it alive. If this loss is for minor reasons, it’s devastating. When independent, small-business owners lose their businesses, they can sell the equipment and perhaps even the real estate they purchased to recoup some of the losses. When agreements are terminated, franchisees walk away with nothing.
That’s why I decided to take on this issue because of my own experience as a franchisee. I heard stories from current franchisees about people doing their best to run small businesses despite the unfair contracts they find themselves in.
I authored legislation that doesn’t change the relationship between franchisees and franchisors but, instead, modernizes it to adapt to a changing industry and maintains the original intention of the law: fairness.
IN 2015, YOU AUTHORED AB 525 TO UPDATE EXISTING FRANCHISE LAW. AFTER SOME COMPROMISE, THE BILL PASSED UNANIMOUSLY AND WAS SIGNED BY GOVERNOR BROWN. YOU HAVE SHOWN YOU AREN’T AFRAID TO TAKE ON TOUGH ISSUES, BUT OFTEN SOFTEN THE RHETORIC AND GET THINGS PASSED. HOW HAVE YOU ACHIEVED THAT BALANCE?
AB 525 marked the end of a multiyear stalemate between the franchisees who own businesses and the corporations that have promised to support them. The bill stated that a franchisor must purchase from the franchisee all the inventory, equipment, and furnishings from the franchisee at the cost the franchisee paid minus depreciation. This is the amount owed to a franchisee.
One of the goals of this bill was to ensure that franchisors couldn’t circumvent California law. AB 525 created several protections for franchisees in the transfer process including providing the current and prospective franchise the approval standards in writing, establishing a timeline for the approval or disapproval of a transfer, and prohibiting a franchisor from preventing a sale or transfer, if certain conditions are met.
IN 2021, YOU AUTHORED AB 676, AND IT SAILED UNANIMOUSLY THROUGH COMMITTEES IN BOTH THE ASSEMBLY AND SENATE, SIGNED INTO LAW BY GOVERNOR NEWSOM. WHAT LESSONS DOES THIS TEACH US ABOUT ANY FUTURE FRANCHISE LEGISLATION WE WOULD PROPOSE, BOTH IN CALIFORNIA AND OTHER STATES?
Years later, I’m still listening to those voices, and while improvements have been made, there’s still more work to do to bring fairness to this system.
Between abdicating responsibilities to franchisees during the COVID-19 pandemic and the revelation of unfair treatment of franchisees of color, time has revealed that more issues need to be addressed.
AB 676 does multiple things to resolve these issues. For example, it explicitly prohibits franchisors from influencing where a franchisee can purchase a franchise based on a protected class, such as race, which has been the subject of ongoing lawsuits against McDonalds by Black franchisees. Some franchisors have used the pandemic as an opportunity to change their liability to transfer burden onto franchisees in exchange for financial help. The bill prohibits that practice.
Currently, franchisors can unilaterally determine the amount franchisees owe when an agreement is being terminated or non-renewed. AB 676 creates a more fair process where both parties have a say. A transfer buyer of a franchise that was established before 2016 won’t receive the protections established by AB 525 even though they’re signing a new franchise contract after the law’s enactment. The bill enables that.
AB 676 also includes adequate disclosures and ensures that the law covers all franchisors and franchisees in California. I’m pleased that my colleagues in the Legislature and the Governor supported these efforts and recognized the need to keep our economy robust and equitable.
ASIDE FROM YOUR WORK ON BEHALF OF FRANCHISEES, IS THERE ANYTHING ELSE THE PUBLIC MIGHT NOT KNOW ABOUT CHRIS HOLDEN, THE PERSON, THAT YOU WOULD LIKE TO SAY?
My faith is very important to me. I have been serving as an elder at my church for many years. My faith centers me and helps me do the work that I do that’s respectful to all people, all opinions, and all points of view. It truly is the anchor and firm foundation that equips me to be the public servant that I am.
MEMBER UPDATE: AAHOA Central Midwest Regional Director Arti Patel Named New Chair of the Oklahoma Hotel & Lodging Association
This month, AAHOA Central Midwest Regional Director Arti Patel has been named the new Chair of the Oklahoma Hotel & Lodging Association. OHLA is Oklahoma’s trade association for the hotel and lodging industry representing $7 billion in state business sales, more than $7 billion in guest spending, and $2 billion in hotel industry wages and salaries. Additionally, AAHOA Members represent a significant part of the economy in Oklahoma, owning nearly 90% of the hotels in the state.
Arti Patel got voted in as a Board Member for the OHLA Board nearly six years ago and became the Secretary of OHLA in 2020. Arti grew up in the family hotel business and decided to continue her career in the industry because of her passion for hospitality and serving guests. She currently works as the Chief Operating Officer at Pristine Hospitality and plays an active role in shaping the future of hospitality through her work and various leadership roles.
During her tenure as Chairwoman, Arti plans to strengthen the collaboration between hotel owners and managers and continue the partnership between AAHOA and OHLA. AAHOA congratulates Arti for serving in this new leadership role and for her tireless service to America’s hotel owners.
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