Regulating Sales of Franchises

Title 4, Division 5, Part 2, Chapter 3 of the Corporations Code deals with general provisions regarding the regulation of the same of franchises in California.

Section 31150 requires every franchisor or subfranchisor offering franchises for sale in this state to at all times keep and maintain a complete set of books, records, and accounts of such sales.

Section 31151 authorizes the commissioner to accept and act upon the opinions, appraisements and reports of any engineers, appraisers, or other experts which may be presented by an applicant or any interested party, on any question of fact concerning or affecting the franchises proposed to be offered and sold.

Section 31152 specifies that any document filed under this law or under the Corporate Securities Law of 1968 may be incorporated by reference in a subsequent application filed under this law if it was filed within four years prior to the filing of the application.

Section 31153 states that the burden of proving an exemption or an exception from a definition is upon the person claiming it.

Section 31154 provides that neither the fact that an application for registration under this law has been filed, nor the fact that the registration has become effective constitutes a finding by the commissioner that any document filed under this law is true, complete or not misleading. It is unlawful to make or cause to be made to any prospective purchaser or offeree any representation inconsistent with law.

Section 31155 states that every applicant for registration of an offer to sell franchises under this law, by other than a California corporation, California limited partnership, or California limited liability company, is required to file with the commissioner an irrevocable consent appointing the commissioner or his or her successor in office to be his or her attorney to receive service of any lawful process in any noncriminal suit, action or proceeding against him or her or his or her successor, executor or administrator.

Section 31156 prohibits any person from publishing in this state any advertisement offering a franchise subject to the registration requirements of this law unless a true copy of the advertisement has been filed in the office of the commissioner at least three business days prior to the first publication.

Section 31157 prohibits any person from publishing any advertisement concerning any franchise in this state after the commissioner finds that the advertisement contains any statement that is false or misleading or omits to make any statement necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading and so notifies the person in writing.

The notification may be given summarily without notice of hearing. At any time after the issuance of a notification under this section, the person desiring to use the advertisement may in writing request that the order be rescinded. 

Section 31158 allows the commissioner to prescribe circumstances under which to accept electronic records or electronic signatures. This section does not require the commissioner to accept electronic records or electronic signatures. The following terms are defined: “electronic record” and “electronic signature.” There is also a legislative finding and declaration.