California SB 919 is the first state law in the United States requiring franchise brokers to register with the state and provide disclosure documents to prospective franchisees before any franchise sale. Effective July 2026 (or one year after appropriation), the law fills a regulatory gap that has existed since franchising began: while franchisors have been required to provide extensive disclosures under federal and state law, the brokers who often serve as the primary point of contact between franchise buyers and franchise systems have operated with virtually no oversight. At Lopes Law LLC, we advise both franchisors and prospective franchisees on California franchise compliance, and SB 919 represents a significant shift in how franchise sales are conducted in the nation’s largest franchise market.

This guide explains what SB 919 requires, who is affected, what the penalties are for non-compliance, and how NASAA’s proposed Model Franchise Broker Registration Act could extend similar requirements to other states.

Why Did California Regulate Franchise Brokers?

Franchise brokers play a significant role in the franchise sales process. Industry estimates indicate that 30% to 40% of franchise sales involve a broker, and in some franchise systems, the majority of new franchisees are introduced to the brand by a broker or franchise sales organization (FSO). The problem is that franchise brokers have traditionally operated without disclosure requirements.

A prospective franchisee working with a broker may not know that the broker receives a commission of $10,000 to $30,000 or more from the franchisor for each sale, that the broker may represent dozens of franchise systems and has a financial incentive to steer buyers toward higher-commission brands, that the broker may have no relevant industry experience or qualifications, or that the broker may have been the subject of prior complaints or regulatory actions.

The FTC Franchise Rule does not regulate franchise brokers. State franchise laws historically focused on franchisor disclosure obligations but did not address broker conduct. California’s SB 919 changes this by creating the first broker-specific regulatory framework in the country.

What Does SB 919 Require?

The law establishes three core requirements for franchise brokers operating in California:

Annual Registration

Franchise brokers must register annually with the California Department of Financial Protection and Innovation (DFPI). The registration requires disclosure of the broker’s identity, business structure, and contact information; a list of all franchise systems the broker represents; compensation arrangements with each franchisor; the broker’s professional background and qualifications; any prior disciplinary actions, lawsuits, or regulatory proceedings; and a filing fee (amount to be established by the DFPI).

Broker Disclosure Document

Before any franchise sale, the broker must provide the prospective franchisee with a written disclosure document that includes the broker’s registration number and current status, the specific compensation the broker will receive from the franchisor for this sale, any ownership interest the broker has in the franchise system, the broker’s experience and qualifications, and a statement that the broker represents the franchisor’s interests and is not acting as the buyer’s advisor.

The disclosure must be provided at least 14 days before the prospective franchisee signs a franchise agreement or pays any consideration, mirroring the FDD delivery timeline under the FTC Franchise Rule.

Recordkeeping

Brokers must maintain records of all franchise sales facilitated, disclosures provided, and compensation received for a minimum of six years. These records must be available for DFPI inspection upon request.

Who Qualifies as a Franchise Broker Under SB 919?

The law defines “franchise broker” broadly as any person or entity that receives compensation for recommending, promoting, or facilitating the sale of a franchise opportunity. This includes independent franchise consultants, franchise sales organizations (FSOs), referral networks that receive commissions, and individuals employed by franchise brokerage firms.

The law includes specific exemptions for franchisor employees who sell franchises directly on behalf of their employer, attorneys providing legal advice about franchise investments, CPAs and financial advisors providing financial analysis, and media companies that publish franchise advertising without facilitating individual sales.

A Client Scenario: How Broker Disclosure Could Have Prevented a Bad Investment

A prospective franchisee contacted our firm for an FDD review after being introduced to a cleaning franchise by a franchise broker. The broker had presented the franchise as a “low-risk, high-return” opportunity and provided projected income figures that were not contained in the FDD’s Item 19 financial performance representations.

During our review, we discovered that the broker was receiving a $22,000 commission from the franchisor for each sale, represented 47 different franchise systems with no particular cleaning industry expertise, provided income projections that substantially exceeded actual Item 19 data, and failed to disclose a 32% franchisee turnover rate over the prior three years.

Had SB 919’s disclosure requirements been in effect, the client would have known the broker’s commission amount, understood the broker represented nearly 50 brands (suggesting a sales-driven rather than advisory relationship), and had 14 days to review the disclosure alongside the FDD. The client ultimately decided not to purchase the franchise, avoiding a $125,000 investment in a system with documented performance issues. For more on protecting yourself during franchise acquisition, see our guide on the franchise validation process.

What Are the Penalties for Non-Compliance?

SB 919 establishes meaningful penalties for franchise brokers who fail to comply:

• Civil penalties: Up to $25,000 per violation, assessed by the DFPI. Each franchise sale conducted without proper registration or disclosure constitutes a separate violation.
• Criminal penalties: Operating as an unregistered franchise broker is a misdemeanor offense.
• Private right of action: Prospective franchisees may sue unregistered brokers to rescind the franchise purchase and recover actual damages, including the franchise fee, investment losses, and reasonable attorney fees.
• Franchisor exposure: Franchisors who knowingly use unregistered brokers to sell franchises in California may face regulatory scrutiny from the DFPI and potential secondary liability.

How Does NASAA’s Model Franchise Broker Registration Act Compare?

NASAA has proposed a Model Franchise Broker Registration Act that would serve as a template for other states. The NASAA model includes bonding requirements providing a financial guarantee for franchisees harmed by broker misconduct, continuing education requirements for registered brokers, and interstate coordination provisions for reciprocal recognition of broker registrations across adopting states.

If other states adopt the NASAA model, franchise broker regulation could become a national standard within the next several years. Franchisors and brokers should prepare by establishing compliant practices now. For more on regulatory changes affecting franchise systems, see our guide on how to franchise your business.

What Should Franchise Brokers Do to Prepare?

If you operate as a franchise broker and sell or plan to sell franchises in California, take these steps before July 2026:

1. Document compensation arrangements. Compile the commission structure for each franchisor you represent. This will be required in both registration and disclosure documents.
2. Draft your broker disclosure document. Prepare the written disclosure required by SB 919. Have franchise counsel review it for compliance.
3. Monitor DFPI rulemaking. Watch for registration forms, filing fees, and implementation guidance from the DFPI.
4. Establish recordkeeping systems. Implement tracking for all franchise sales, disclosures, and compensation with six-year retention.
5. Review sales practices. Ensure performance claims are consistent with franchisor FDD Item 19 disclosures. Unauthorized earnings claims are already problematic under the FTC Franchise Rule; SB 919 adds additional accountability.

What Should Franchise Buyers Know About Working with Brokers?

Whether or not SB 919 is yet in effect, understanding the broker relationship is essential for every franchise buyer:

• Brokers work for the franchisor, not for you. The broker is paid by the franchisor when you buy. They have a financial incentive to close the sale.
• Ask about compensation. Even before SB 919, ask the broker directly how much they will be paid if you purchase.
• Get independent legal review. Never rely solely on a broker’s assessment. Have the FDD reviewed by an independent franchise attorney. At Lopes Law LLC, our flat-fee FDD validation review is $3,000.
• Verify broker claims against the FDD. Any performance claims should be verifiable in Item 19. If broker claims exceed Item 19 data, that is a serious red flag. See our guide on franchise agreement red flags.

Frequently Asked Questions About California SB 919

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Last updated: March 13, 2026