California’s Franchise Sales Disclosure Law Is Now Official

California Governor Gavin Newsom has signed Senate Bill 919 into law, introducing new franchise sales disclosure requirements that will apply to third-party franchise sellers, including franchise brokers, broker networks, and franchise sales organizations. Set to take effect in July 2026, the law is seen as a significant step toward increasing transparency in franchise sales.

According to the International Franchise Association (IFA), this legislation supports responsible franchising by ensuring franchisees have more information at their disposal. With a new franchise opening approximately every eight minutes across the U.S., this measure is expected to help prospective franchisees better assess potential investments, aligning their choices with personal interests and financial goals to boost their chances of success.

IFA Applauds New Transparency Standards for Third-Party Franchise Sellers—Key Requirements of Senate Bill 919

Senate Bill 919 amends the California Franchise Investment Law by adding specific requirements for third-party franchise sellers:

• Annual Registration: Third-party sellers must register annually and pay a fee, similar to existing requirements in states like New York and Washington.
• Enhanced Disclosure Document: Prospective franchisees will receive a new, brief disclosure document that provides key details about third-party franchise sellers. This includes:
  • Seller contact information and state of formation (if applicable).
  • A mini-resumé detailing the seller’s professional experience over the past five years, relevant certifications, litigation history, and compensation structure.
  • Insights into industries the seller represents, the number of brands within each, and the total units sold for each brand over the previous year.

These enhanced disclosures aim to equip franchisee candidates with essential information to make well-informed decisions.

IFA’s Support for Responsible Franchising

The IFA championed this legislation as it aligns with their guidelines on responsible franchising, released earlier this year. IFA President and CEO Matt Haller noted that this law provides prospective franchisees with valuable information during the presale phase, strengthening the foundation of the franchise relationship. Haller added, “We were honored to lead the discussion with all franchise stakeholders, and we hope this law becomes a model for responsible franchising in other states.”

Jeff Hanscom, IFA’s vice president of government relations, stated that Senate Bill 919 is the result of collaborative efforts within the IFA, which involved legislators, franchisors, franchisees, and the broker community. “The goal is transparency for everyone in the sales process,” he explained.

Broad Support for Senate Bill 919

Introduced in January by Democratic State Senator Thomas Umberg, Senate Bill 919 quickly gained traction in California’s legislature, passing the Senate with a 37-1 vote in May and clearing the Assembly with unanimous support (75-0) in August. Senator Umberg highlighted that this law will offer critical protections for Californians interested in franchise investments.

The IFA, Coalition of Franchisee Associations, and American Association of Franchisees & Dealers have all supported the bill from its inception, emphasizing its role in fostering transparency and protecting investors in California’s franchise landscape.

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