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MSAs for Medical Practices in California: Uncover Hidden Costs and Minimize Risk

Do you own and/or operate a medical practice in California? If so, you may be considering entering into a medical services agreement (MSA). Broadly explained, these are contracts between a professional practice and a third party company that offers administrative/business services. An MSA can be a useful tool for a medical practice in California, but it needs to be properly structured. Here, our Fremont business lawyer for medical practices provides a guide to MSAs in California.

What is a Medical Services Agreement (MSA)?

An MSA is a contract between a licensed medical practice and a third party management and/or administrative services company. The agreement allows the non-medical entity to handle business functions such as billing, human resources, accounting, marketing, facilities management, and technology systems. At the same time, the professional medical corporation (PC) retains control over all clinical decisions.

In California, these arrangements must be carefully structured to comply with the state’s Corporate Practice of Medicine (CPOM) doctrine. The law prohibits non-physicians or unlicensed entities from owning, managing, or influencing medical decision-making. The Medical Board of California enforces strict boundaries to ensure that only physicians direct patient care.

Why Medical Practices in California Enter into MSA

Many professional medical practices in California enter into MSAs. At their best, these agreements can help to make business operations more efficient and reduce administrative burdens. Running a compliant and profitable practice in California requires substantial time and resources unrelated to patient care. A management company can provide economies of scale by handling functions such as insurance credentialing, revenue cycle management, and payroll. MSAs also allow smaller practices to access advanced systems (such as electronic health records (EHR) management) that they may not be able to reasonably afford independently.

Be Prepared: Know the Hidden Costs and Risks of MSAs

Despite their benefits, MSAs carry significant legal and financial risks. The most common problem arises when an agreement crosses the line into impermissible control over medical decision-making. If an MSO sets physician compensation, directs clinical staffing, or influences patient scheduling, regulators may find a CPOM violation. Here are key points to know:

Hidden financial risks: In many cases, MSAs can conceal substantial costs. Flat fees, revenue-sharing provisions, and performance bonuses tied to patient volume may violate federal and state anti-kickback or fee-splitting rules.
Data privacy and HIPAA liability: Because MSAs often manage patient billing and records, they may become business associates under HIPAA (45 C.F.R. §160.103). A proper business associate agreement (BAA) must accompany the MSA.
Unfavorable contract: Some MSAs include restrictive termination clauses or automatic renewal terms that leave the physician practice trapped in a long-term agreement. It is imperative that any MSA is drafted and/or reviewed by an attorney.

Speak to Our Fremont Employment Lawyer for Employers today

Lynnette Ariathurai is a California business attorney who has considerable experience representing medical practices. If you have any questions or concerns about MSAs, we can help. Contact us today for your completely confidential consultation. From our Fremont office, our team provides business law services to medical practices throughout the Bay Area.

business associate agreements, medical services agreements, MSA costs, MSA risk

Employer Guide – Protection and Guidelines

Employment law is complicated. California has among the most comprehensive, worker-friendly employment laws in the entire country. Employers must be in full compliance with the law. A proactive approach to labor and employment compliance can help businesses and organizations reduce their risk of liability. Lynnette Ariathurai is a solutions-focused California employment lawyer. If you have any questions about employment protections or employment guidelines, please do not hesitate to contact us for a fully private, no obligation consultation.

We Provide Legal Protection to Employers in California

Employer Representation

We are committed to representing employers in employment law matters. Our firm can help you develop workplace policies, employee handbooks, required training, and employment contracts to reduce your risk of legal/liability exposure. We also defend employers against federal and state claims, including discrimination, harassment, wage and hour disputes, and administrative complaints. Employers can rely on our proactive legal counsel.

Preventing Employee Claims

The best way to deal with employee claims is for the employer to prevent them from arising in the first place. A proactive approach can make the difference. We help employers in the Bay Area understand the ever-evolving state and federal requirements so that they remain fully compliant. Preventive support limits future lawsuits and preserves resources. If you have any questions about how to develop the right policy to prevent a claim from an employee, our attorney is here as a resource.

Defending Employee Claims

Even if your company does everything the right way, the employer could still face a claim from an employee. California employers face many types of employee allegations, from EEOC and Labor Commissioner complaints to attorney letters and lawsuits. We defend employers against federal and state claims, including discrimination, harassment, overtime, and leave disputes. Facing liability in an employment law claim has the potential to be very costly for an employer. If you have any questions about how an employer can deal with a claim from an employee, our California attorney is here to help.

Handling Discrimination Claims

California strictly enforces anti-discrimination laws. We help Bay Area employers with preventing, responding to, and resolving discrimination claims under federal and California law. Employers must understand Title VII and FEHA obligations to avoid protected-class discrimination legal exposure. Our California employment lawyer can review allegations, conduct impartial investigations, and advise employers on defense strategy.

Termination of Employees

Terminating an employee can be complicated. Even if it is “for cause.” California employers must follow strict rules when terminating employees. Our business law firm advises companies and organizations on lawful termination procedures that reduce risk under state and federal law. Guidance covers documentation, performance records, final pay requirements, wage statements, and timing obligations.

Contact Our Fremont Employment Lawyer Today

Lynnette Ariathurai is an experienced California employment lawyer. If you are an employer with questions about your rights or your options, we are here to help. Contact us today for a completely confidential, no obligation initial consultation. With an office in Fremont, we provide employment law representation throughout the region in California.

California employment law, employer liability, employer risk, employment law

Commercial Leases – Good Reasons to be Reviewed by an Experienced Attorney

A commercial lease is a legally binding contract between a tenant (business or organization) and a landlord. The specific terms of the lease matter. They will govern the relationship between the commercial landlord and the commercial tenant. A lawyer should always review a commercial lease. Your attorney will ensure that the terms of the lease are clear, fair, and reasonably aligned with your business’s long-term needs. Here, our Fremont business attorney explains why it is so important to have your commercial lease reviewed by an attorney.

Commercial Leases are Lightly Regulated in California

In California, commercial leases are not subject to the same regulations as residential leases. Commercial tenants have less protection under landlord-tenant law. They are largely protected by contract law. Indeed, commercial leases are largely dictated by the terms agreed upon by both parties, and courts will generally enforce them as written. Without legal review, a business may unknowingly commit to burdensome terms, hidden fees, or one-sided obligations that could hinder the operations of your company and undermine its financial well-being.

Note: On January 1st, 2025, Senate Bill 1103 (SB 1103) took effect in California. The law provides some additional legal protections for “qualified commercial tenants.” These tenants are generally very small businesses, particularly in the restaurant industry.

Important Provisions to Be Aware of in a Commercial Lease

With a commercial lease, the basics always matter. You need to know about things like the monthly rate, the duration of the agreement, and any restrictions on the use of the property. Beyond that, commercial leases in California also often include additional (important) provisions, such as:

CAM/net charges: Common area maintenance (CAM) and net charges often include costs for property upkeep, but a key issue is whether major asset replacements or property improvements can be passed directly to the tenant. Without clear lease terms, tenants may be responsible for significant costs, such as roof repairs or an HVAC replacement.
CAM/NNN (included/excluded costs): Commercial tenants should carefully review what expenses are included in CAM and NNN charges. In some cases, landlords may attempt to shift excessive costs onto tenants. Some leases allow landlords to pass through expenses such as administrative fees, capital improvements, or largely unrelated operational costs.
Duty to repair and replace: A lease should clearly define which party is responsible for repairs and replacements, particularly for critical systems like plumbing, HVAC, and structural elements. Some agreements make the tenant responsible for maintaining all or part of systems even if they were at the end of their lifespan when the lease began.
Renewal (options to extend a lease): You need to understand your right to renew. An option to extend a lease is not always an automatic renewal. Rather, it may be a right that must be properly exercised under specific conditions. Tenants should carefully review the terms, including rent adjustments, deadlines for exercising the option, and any additional requirements that may limit their ability to renew.

Contact A California Commercial Lease Review Attorney Today

Lynnette Ariathurai is a California business attorney with extensive experience drafting, negotiating, and reviewing commercial lease agreements. If you have any questions about a commercial lease, we are here to help. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we handle commercial lease reviews throughout the Bay Area.

commercial lease contract, commercial lease provisions, commercial lease regulations California, commercial lease renewal

What is Private Mediation and How Does it Work to Resolve a Dispute?

Is your business locked in any type of dispute? If so, you are undoubtedly looking for the best option to resolve the problem in a favorable manner. Litigation has a lot of downsides—it can be time-consuming and expensive. Mediation is a form of non-adversarial alternative dispute resolution (ADR). Lynnette Ariathurai is a California lawyer with extensive experience handling business mediation. Here, our Fremont business attorney explains what private mediation is and discusses how it works to move a commercial dispute towards a resolution.

What is Private Business Mediation in California?

In California, private mediation is a voluntary, non-adversarial process that is an alternative to litigation. As explained by the California Department of Consumer Affairs, mediation is when “a neutral person(s) facilitates communication between the disputants to assist them in reaching a reconciliation, settlement, or other understanding” in a structured environment where parties to a dispute—including a commercial dispute—can attempt to work out a settlement.

How Mediation Works to Resolve a Dispute in California

Mediation can be a highly effective tool for resolving disputes in California—especially in cases where parties have at least some common ground, are interested in preserving a relationship, and/or want to avoid the time and cost of litigation. Here is an overview of how private mediation works:

The parties must agree to mediate: Private commercial mediation is voluntary in California. The process does not start until the parties to a dispute agree to mediate. For mediation to be effective, all parties must have a good faith intent to resolve the matter.
A neutral mediator is selected: The mediator is a trained professional who helps to facilitate communication and negotiation. The parties to a business dispute must select an agreed-upon mediator. It is best to look for a mediator with relevant experience.
You need to prepare for mediation: Proper preparation is key to mediation—not just to get the best outcome, but also to help move the case towards dispute resolution. You should gather and prepare all relevant evidence.
The mediator helps to facilitate resolution: The role of the mediator is to help facilitate the resolution of a dispute. To be clear, the mediator is not empowered to make any final decisions. It is their role to clarify key issues and facilitate a resolution.
Agreement is voluntary—parties can withdraw: In California, business mediation is fundamentally voluntary. The parties are not required to agree to a settlement. They retain the right to withdraw from mediation without an agreement if one cannot be reached.

Business mediation is complicated. To get the most out of the process, it is crucial that you and your company are properly prepared and that you know what to expect. A top-tier California business mediation lawyer can help you navigate all aspects of the process.

Contact Our California Business Mediation Attorney Today

Lynnette Ariathurai is a California business mediation lawyer who is committed to helping companies find the best solution. If you have any questions about the mediation process for dispute resolution, please do not hesitate to contact us for a fully confidential, no obligation consultation. From our Fremont office, we provide business mediation services throughout the Bay Area.

business contracts, business dispute mediation, mediation, private mediation attorney

Arbitration Clauses in a Contract: When Arbitration Can and Cannot be in a Contract in California

Arbitration is a private dispute resolution process where parties agree to have a neutral third party (the arbitrator) hear their case and make an (often) binding decision. It is not uncommon for business contracts—but commercial agreements and employment agreements—to contain mandatory pre-dispute arbitration clauses. You may be wondering: Is an arbitration clause enforceable in California? The answer is presumptively “yes”—but there are certain requirements that it must meet. Here, our Fremont business lawyer explains the key things to know about when an arbitration clause can and cannot be in a contract in California.

Arbitration Clauses are Generally Enforceable in California

A pre-dispute arbitration clause is a contractual provision requiring parties to resolve future disputes through arbitration instead of litigation. It is commonly included in consumer, employment, and commercial contracts. California lawmakers have long viewed mandatory arbitration provisions with skepticism. In 2019, Assembly Bill 51 (AB 51) was passed in the state to prohibit employers from requiring employees or applicants to sign arbitration agreements as a condition of employment. However, its enforcement was challenged. On January 1st, 2024, a federal court issued a permanent injunction. The court determined that the Federal Arbitration Act (FAA) preempts AB 51. As such, arbitration clauses for employment contracts are still lawful in California.

While Permissible, Arbitration Clauses Must Meet Certain Standards in California

Even though AB 51 never took effect, mandatory arbitration clauses must meet certain criteria to be lawful in California. The California Supreme Court set the standard in the case of Armendariz v. Foundation Health Psychare Services, Inc. Here are five key elements:

Arbitrator must be neutral: In California, arbitration clauses must ensure that the arbitrator is impartial and free from any conflicts of interest.
More than minimal discovery must be allowed: While arbitration does not include a full discovery process, it cannot be limited to only “minimal” discovery.
Fees for the arbitration cannot be unreasonable: Businesses and employers cannot impose excessive arbitration costs on customers and employees.
All forms of relief available in court must be possible remedy: Arbitration agreements must not limit the types of damages or remedies that a party could otherwise seek in court.
The arbitration must be decided in writing: Finally, the arbitrator must make his or her decision in writing with a basic explanation of the basis of the ruling.

Beyond that, a mandatory arbitration provision in California may also potentially be considered invalid and unenforceable if it is substantively unconscionable. For example, a contract arbitration clause that requires an employee to waive all PAGA claims rights has been previously deemed overly broad and substantively unconscionable by courts.

Speak to Our California Arbitration Attorney for a Confidential Consultation

Lynnette Ariathurai is a California business lawyer who has the experience to help companies and employers with the full range of arbitration cases. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we serve business throughout the region, including in Union City, San Leandro, San Jose, and Santa Clara.

arbitration clause requirements, California mandatory arbitration

Construction Contracts: What is Required to Be in a Home Improvement Contract for Residential Construction?

According to the data cited within the California Residential Remodeling/Renovation Market Study, home improvement is a multi-billion dollar industry in the state. For contractors, the remodeling and renovation business offers many different opportunities. Home improvement projects in California that exceed $500 in cost require a proper license and a written contract. Within this article, our California business lawyer highlights key things that are required to be in a home improvement contract for residential construction.

California CSLB Regulates Home Improvement Contracts

The Contractors State Licensing Board (CSLB) regulates residential home improvement contracts in California. As a construction company or contractor, it is imperative that you ensure full compliance with all CSLB requirements. A well-drafted contract not only ensures that your company will meet regulations, but it can also protect you if a dispute arises with a homeowner.

Key Requirements for a Home Improvement Contract in California

What does a contract for a residential home improvement project need to include in California? Here is an overview of the most notable requirements from the CSLB:

In writing: Home improvement contracts in California must be in writing to comply with CSLB regulations. A written contract helps to ensure clear terms. If your business is doing a home improvement project for $500 or more, the agreement must be in writing.
Contractor identification: The home improvement contract must include the contractor’s full name, address, license number, and contact information. It is imperative that a contractor accurately identifies itself within the agreement.
Description of materials and work: In California, a contract for a home improvement should also include comprehensive details of the materials and work. It should clarify the specific materials, quantities, and the scope of work.
Permitting information: There should also be terms regarding any permits that will be needed to complete the project. Among other things, this part of the agreement should clarify who is responsible for obtaining the permit(s).
Detailed payment schedule: A payment schedule, including the down payment and installment amounts, must be clearly outlined. All contractors engaged in residential home improvement work should note that California law puts limits on down payments ($1,000 or 10 percent of the contract, whichever is less).
Written change order (modifications): Issues can arise during home improvement projects. It is not uncommon for homeowners to request modifications. Any changes to the original contract must be documented with a written change order.

Note: The above listed requirements for residential remodeling and renovation projects in California apply to all home improvement projects valued at $500 or more.

Contact Our Bay Area Business Law Attorney Today

Lynnette Ariathurai is a business law attorney with extensive experience drafting and reviewing contracts. If you have any questions about a construction contract for a home improvement project, we are here as a resource. Contact us today for a fully confidential consultation. From our Fremont law office, our firm represents contracts throughout the Bay Area.

construction contract requirements, Construction contracts, CSLB, home improvement contracts, residential construction contract requirements

Arbitration Clauses in a Contract: Benefits and Pitfalls of Using Arbitration to Resolve Disputes

Arbitration is a private dispute resolution process where parties agree to have a neutral third party (arbitrator) decide, after reviewing the evidence and hearing the arguments. It is not uncommon for commercial contracts to contain pre-dispute arbitration clauses that mandate the arbitration of any dispute that might arise. Here, our Fremont contact dispute lawyer explains how contract arbitration provisions work and highlights the advantages and disadvantages of using arbitration to resolve a dispute.

An Overview of Arbitration Clauses in California

Arbitration clauses in California contracts are provisions that require parties to resolve disputes through arbitration rather than litigation. You may also hear these referred to as a forced arbitration clause or a mandatory arbitration provision. The California Arbitration Act generally upholds the enforceability of pre-dispute arbitration clauses. Indeed, a California court will typically enforce these provisions so long as they are clear, voluntary, and do not unfairly disadvantage one party, except when arbitration clauses are against public policy.

The Advantages of Using Arbitration for a Contract Dispute

A Faster, More Efficient Resolution

One of the primary advantages of using pre-dispute arbitration clauses in contracts is that they promote a faster and more efficient resolution when a dispute arises. In contrast to litigation, arbitration can be completed far more quickly.

Cost Effective

Another advantage of arbitration for contract disputes is that it can save money. Arbitration is generally less expensive than litigation. It avoids many of the procedural complexities (and the costs) that are typically associated with commercial litigation.

Full Privacy

Finally, arbitration is a confidential process. In California, arbitration proceedings are private. As such, they can help businesses protect sensitive information. On the other hand, litigation can become public record in California.

The Disadvantages of Using Arbitration for a Contract Dispute

Very Little Ability to Litigate

As noted, California law (and federal law) strongly favor the enforcement of pre-dispute arbitration contracts that have been voluntarily agreed to by the parties. Mandatory arbitration means that the parties to the contract will generally lose the right to litigate their case.

Lack of a Comprehensive Discovery Process

Litigation of a contract dispute allows for discovery. In contrast, arbitration limits formal discovery processes. That can save time and money, but it can also make it harder for parties to gather evidence—especially if relevant information is in the control of the opposing party.

Limited Appeal Rights

While it is technically possible to appeal the decision of an arbitrator, that appeal can generally only be brought on very limited, narrow grounds. You do not have full appeal rights in arbitration. Arbitration decisions are usually final and binding.

Contact Our Fremont Business Arbitration Lawyer Today

Lynnette Ariathurai is a California business lawyer with the skills and experience to handle arbitration matters. If you have any questions about arbitration, a contract dispute, or a related matter, please do not hesitate to contact us today for a confidential consultation. With an office in Fremont, we serve clients throughout the Bay Area.

arbitration benefits, arbitration for dispute resolution, arbitration pitfalls, contract arbitration clauses

Stealing Employees from a Nursing Practice in California

A nursing practice is about its people. It is the type of business that requires skilled, experienced nurses on staff to operate competitively. A great nurse is one that has had a lot of training—and many businesses make big investments into their nurses. This raises an important question: Is it legal to take the nurses from a competing business? The answer is generally “yes”—California law provides limited protections. Here, our Fremont business lawyer highlights the key things to know about our state’s regulations regarding stealing employees from a nursing practice.

California Law Largely Does Not Prohibit “Stealing” of Employees from Nursing Practices

California is an at-will employment state that, for the most part, protects an employee’s ability to move from one job to another. Indeed, there is strong public policy in favor of employee mobility and competition and the medical field, including nursing, is no exception. Indeed, non-compete agreements are largely unenforceable in our state. Further, there is no law that stops the stealing of employees from another medical practice in California.

The exception (workplace raids): There is an exception in California for so-called “workplace raids.” If a competitor engages in unfair practices—such as intentionally targeting another business’s employees with the intent to disrupt or interfere with that business—it may be unlawful. It could give rise to a claim under California Business and Professions Code § 17200.

Nursing Practices Have a General Right to Recruit from Competing Businesses

Like other businesses, nursing practices have a general right to compete in the marketplace. Among other things, this means that they have the right to recruit or “steal” employees from competing firms by offering them better opportunities. It could be higher pay, better benefits, or more favorable working conditions. As long as the recruitment is done without violating the law it is legally permissible in California.

How Nursing Practices Can Protect their Investment in Human Capital

Although a nursing practice cannot stop a competing business from trying to recruit their employees, there are steps that employers in the health care industry in California can take to protect their investment in human capital. Options include:

Employment contracts: To protect their investment in human capital, nursing practices can use employment contracts. A California employment lawyer can help you structure nursing contracts in a manner that helps prevent workers from leaving to take an offer at a competing business.
Non-solicitation agreements: While non-compete clauses are unenforceable in California, non-solicitation agreements that prevent former employees from soliciting the company’s clients or employees may be enforceable if they are reasonable in scope
Trade secret protections: Nursing practices should also safeguard their trade secrets and confidential information. Under the California Uniform Trade Secrets Act, businesses can take legal action against anyone who misappropriated their trade secrets.

Contact Our California Business Lawyer for Nursing Practice Today

Lynnette Ariathurai is a California business attorney with the skills and experience to represent nursing practices. If you have any questions about nursing practice employee stealing/poaching, please do not hesitate to contact us today for a confidential initial consultation. With a law office in Fremont, we represent nursing practices throughout the San Francisco Bay Area including San Jose, San Mateo, Hayward, and Newark.

California workplace raid law, employee poaching, employee stealing

Building a Group Practice Veterinarian Business

According to the most recent information published by the Bureau of Labor Statistics (BLS), California had 7,770 actively licensed veterinarians as of 2022. For veterinarians, there can be significant commercial advantages to operating as part of a group practice. At the same time, building a successful group veterinary practice is complicated. It is imperative that you have the right structure in place. In this article, our Fremont attorney for starting a business highlights the key things to know about building a group practice for a veterinarian business in California.

Develop a Shared Vision to form a Group Veterinary Practice (Business Plan)

Building a successful group veterinary practice starts with getting all major players on the same page. It is generally a best practice to develop a comprehensive business plan. Among other things, your business plan should outline the goals, operational strategies, and financial projections of your practice. It should also include things like a market analysis—which can be used to identify potential clients, competitors, and commercial risks.

Form Your Veterinarian Business – You Need the Right Legal Structure

The right legal structure is essential for your group veterinary practice. In California, a professional veterinary corporation is generally the most sensible structure for group veterinary practices. It provides liability protection while being taxed as an S-corporation. Notably, there are strict ownership requirements for professional veterinary corporations in our state. It should be owned by a licensed veterinarian. To form a professional veterinary corporation, you will need to file articles of incorporation with the California Secretary of State and draft bylaws.

Ensure Your Business is Properly Registered and in Compliance with Tax Regulations

Once your professional veterinary corporation is formed, it is crucial to register your business and ensure compliance with all business regulations and tax laws. Apply for an employer identification number (EIN) from the IRS, which is necessary for tax purposes. California has an annual franchise tax of $800 for all professional corporations. Beyond tax laws, it is also crucial that you ensure that all veterinarians who are part of the group practice are properly licensed.

Find and Lease the Right Commercial Space to Operate Your Veterinary Business

A group veterinary practice in California needs the right commercial space to operate effectively. Finding the right location is a key component to the success of your group practice. Consider factors such as accessibility, parking availability, proximity to a demographic that aligns with your target market, and the potential for growth. As commercial lease negotiations can be complex, you should be ready to consult with a top business start-up attorney.

Contact Our Fremont, CA Business Law Attorney for Veterinarians Today

Lynnette Ariathurai is a top business law attorney with the skills and experience to represent veterinarian businesses. If you have any specific questions or concerns about building a group practice veterinarian business, please contact us today for a fully confidential consultation. With an office in Fremont, we serve veterinary practices throughout the Bay Area.

group vet practice, group veterinary business, veterinary group practice, veterinary practice legal advice

5 Critical Aspects of a Franchise Agreement—What to Know Before You Sign

Franchises are one of the most popular business models in California. According to data from the International Franchise Association (IFA), there are approximately 76,000 franchise businesses operating in the state. The franchise agreement is the foundation of the relationship between the franchisor and the franchisee. As a prospective franchisee, you need to carefully review the terms of the contract. Here, our Fremont business law attorney highlights five critical aspects of a franchise agreement and explains the key things to know before you sign in California.

California Regulates Franchise Agreements—But Contract Language is Still Key

The California Franchise Relations Act (CFRA) is a state law that establishes a regulatory framework for franchise relationships. It was passed, in large part, to establish protections for franchisees. The CFRA aims to foster fair business practices and safeguard the interests of California franchisees. Along with other key issues, the law regulates:

Jurisdiction;
Termination;
Nonrenewal;
Transfer of rights;
Inventory repurchases;
Arbitration clauses; and
Venue selection.

While California law provides some important legal protections to franchisees, it is imperative to emphasize that the relationship between the franchisor and the franchisee is still primarily governed by the franchise agreement. You should ensure that your franchise agreement is reviewed by a California business lawyer who has experience representing franchisees.

Note: The California legislature recently passed Assembly Bill 676 (AB 676) into law. It updates both the CFRA and the California Franchise Investment Law (CFIL). The state statute imposes some additional obligations/restrictions on franchisors.

Five Key Things to Look for in a Franchise Agreement in California

The Total Cost (Start-up Investment, Ongoing Costs, etc)

Cost matters. Franchisees in California should consider both the initial investment and ongoing costs. The initial cost—often referred to as the franchise fee,—is the amount payable upfront to gain the right to operate the business. It can vary widely based on the franchise, the industry, and the specific market conditions. Of course, this is just the beginning: A franchisee in California is often also responsible for ongoing costs, such as royalty fees, marketing fees, and other expenses.

Grant of Rights (Territorial Protection, Intellectual Property Usage, etc)

The grant of rights outlines the specific rights and restrictions that the California franchisee has under the franchise agreement. Along with other things, this may include territorial rights. These rights dictate where the franchisee can operate and provide protection from encroachment by other franchisees. Beyond that, the franchisor may grant the franchisee the right to use their IP.

The Resources that Will Be Provided By the Franchisor

Franchisors often provide a variety of resources to franchisees to aid in their success. These resources may include comprehensive training programs, ongoing support, marketing materials, and access to proprietary systems and technology. The specifics of these resources should be clearly outlined in the California franchise agreement to ensure both parties understand their obligations.

Duration—including Renewal Rights and Early Termination Rights

The duration of the franchise agreement defines how long the franchisee has the right to operate the business. This is usually a fixed term, often between 5 and 20 years, but it varies depending on the franchisor. Additionally, the agreement will detail the terms for renewing the contract at the end of the initial term and conditions under which the agreement can be terminated early.

Dispute Resolution Provisions

Dispute resolution provisions are integral to any franchise agreement signed in California. They lay out the process for resolving disagreements between the franchisor and franchisee, whether they relate to contract interpretation, operational issues, or financial disputes. These provisions usually stipulate whether disputes will be handled through negotiation, mediation, arbitration, or litigation. Many franchise agreements include a mandatory arbitration provision.

Call Our Fremont, CA Franchise Law Attorney Today

Lynnette Ariathurai is a business law attorney with the skills, experience, and expertise to represent franchisees. If you have any questions about the terms or conditions of a franchise agreement, please do not hesitate to contact us today for a confidential, no obligation consultation. With an office in Fremont, we provide franchise law representation throughout the Bay Area.

Franchise agreements, franchise dispute resolution, franchise law, franchise regulations