California Signs Senate Bill 919 into Legislation

California Governor Gavin Newsome recently signed into law California Senate Bill 919, a bipartisan legislation to add registration and pre-sale disclosure requirements to third-party franchise sellers such as brokers, broker networks, and franchise sales organizations.

The signature was supported by the International Franchise Association (IFA), who established longstanding principles of its “Responsible Franchising” initiative by working to strengthen the franchise relationship at the start of the franchise sales process. The IFA previously announced its support of model legislation by the North American Securities Administrators Association (NASAA) that would provide registration and disclosure requirements for third-party franchise sellers to establish greater transparency in the franchise sales process.

“By improving information available to prospective franchisees during the presale process, the legislation strengthens the foundation on which the franchise relationship begins,” said Matt Haller, IFA President and CEO. “We were honored to lead the discussion and debate with all the franchise stakeholders, and we hope this law will serve as a model for Responsible Franchising in other states. IFA thanks the bipartisan group of lawmakers who made S.B. 919 a reality, and the governor for signing it into law.”

Franchise brokers and third-party sellers serve as intermediaries between franchisors and franchisee candidates. They earn a fee from franchisors for successfully bringing qualified candidates to them. Third-party sellers are required to register in New York and Washington, and the IFA hopes that California passing legislation will lead to other states adopting similar laws.

S.B. 919 amends the California Franchise Investment Law (CFIL) to add annual registration and pre-sale disclosure requirements for franchise broker networks, franchise brokers, and franchise sales organizations, including: 

1. File an annual registration similar to what currently is required in New York and Washington and pay the applicable fee.

2. Deliver to prospective franchisees a brief disclosure document that includes: (1) information about third party franchise sellers generally and questions a prospective franchisee may ask their third party franchise seller; (2) contact information and state of formation (if applicable) of third party franchise seller; (2) professional experience (past five years) and any certifications or continuing education completed; (3) litigation history; (4) types of services performed and general compensation structure; (5) industries represented and number of brands within each industry; and (6) brands for which franchises were sold during the prior year, including the total number of units sold for each brand.

“California has completed some important work in recent years to ensure transparency and consumer protections for residents looking to invest in franchise operations,” said Senator Thomas J. Umberg (D-Santa Ana), the bill’s author. “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.”

S.B. 919 passed the state Senate in May in a 37-1 vote, while the California Assembly approved the bill unanimously, 75-0, in August. The law will take effect in July 2026.