Early last week, the California Department of Financial Protection and Innovation (DFPI) sent out a press release on a weeks-old action against the fast-casual barbecue franchise Dickey’s.
The state cited Dickey’s for concealing the true number of franchise locations that had closed in its franchise disclosure document. The number that Dickey’s reported was 20. The real number was 36.
For this, the company fined Dickey’s $36,800. And Dickey’s was ordered to ensure that its numbers were accurate the next time.
Neither is all that big of a penalty. For Dickey’s, a $36,800 fine may not be great, but it’s relatively small for a company that, as of last year, generated more than $200 million in system sales.
What’s more, Dickey’s has essentially stopped franchising in California, and other registration states, after it apparently opted not to submit a new franchise disclosure document last year.
But the penalty isn’t necessarily the point here. This is: California sent out a press release about the penalty, something it hadn’t done much of in the past. Yes, the release was late. But they still sent one.
And Rohit Chopra, a former FTC commissioner who is now the California Secretary of Business and Consumer Services, highlighted that release on his X account, noting that, “When an entrepreneur invests their life savings to launch a franchised business, they shouldn’t be tricked by the corporate chain offering the opportunity.”
“California is making clear to companies: follow the law or face the consequences,” KC Mohseni, DFPI commissioner, said in a statement. “Companies must be truthful and transparent. There is no room for deceptive practices that harm consumers and small business owners.”
When an entrepreneur invests their life savings to launch a franchised business, they shouldn't be tricked by the corporate chain offering the opportunity.
— Rohit Chopra (@ChopraUSA) August 31, 2026
California has sanctioned @Dickeys Barbecue Pit for grossly misrepresenting its own success. https://t.co/hmfi6TWIzP
The regulation of franchise sales in the U.S. is a haphazard collection of state and federal rules, in addition to a healthy dose of legal action. Regulations are not broadly enforced, and when they are the penalties are often weak, at best.
Most notably, the fast-casual burger franchise Burgerim was handed $56 million in penalties back in 2024 after selling more than 1,500 franchises on a barely workable brand, even though the chain had long been all but defunct. Its founder, Oren Loni, paid just $1,000, while the rest of $44 million in penalties was suspended.
Penalizing companies that violate disclosure rules is important. But it’s important to penalize companies while they are still trying to sell franchises. And then publicizing those penalties.
Franchises need to be able to sell franchisees on the potential of their offering. Companies need to get a certain number of franchisees to be able to generate a profit. That can lead to all kinds of compromises, and outright violations, in how these business opportunities are sold.
Fear of such publicity could, in theory, prevent such violations in the future. In theory.
There is one other part of the California release we should point out, noting that the agency “is working to strengthen its oversight of the franchise market to ensure entrepreneurs are not improperly deceived or coerced.” The agency said it plans “additional guidance to determine whether any existing rules need to be updated.”
And it also noted that future enforcement actions could include remedies to help franchisees that are harmed by such practices. “This work is particularly important,” DFPI said, “considering the slowdown in enforcement of franchise protections by federal regulators.”