Amended in Assembly March 10, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1782

Introduced by Assembly Member Maienschein

February 4, 2016

An act to amend Section 31013 of, and to add Section 31020 to, the Corporations Code, relating to franchises.

LEGISLATIVE COUNSEL’S DIGEST

AB 1782, as amended, Maienschein. Franchises: offer to sell: trade show.

The Franchise Investment Law generally requires a franchisor to register with the Department of Business Oversight before an offer or sale of a franchise in this state and provides that a willful violation of this law is a crime. Existing law provides, among other things, that an offer or sale of a franchise is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or, if the franchisee is domiciled in this state, the franchised business is or will be operated in this state. Existing law provides that an offer to sell is not made in this state merely because a radio or television program originating outside this state is received in this state.

This bill would provide than an offer to sell is not made in this state merely because a begin insert prospective franchisor, or a end insert franchisor who is not then offering a franchise for sale in California and has not registered an offering under the Franchise Investment Law begin insert , end insert secures a space at a franchise trade show from which it offers information about its products, services, or system to the general public under specified circumstances. The bill would also define a franchise trade show for purposes of the Franchise Investment begin delete Law and would authorize a franchisor to offer a franchise for sale at a franchise trade show, as specified. end delete begin insert Law. end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 31013 of the Corporations Code is
amended to read:

31013.  

(a) An offer or sale of a franchise is made in this state
when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or, if the franchisee is domiciled in this state,
the franchised business is or will be operated in this state.

(b) An offer to sell is made in this state when the offer either
originates from this state or is directed by the offeror to this state
and received at the place to which it is directed. An offer to sell is
accepted in this state when acceptance is communicated to the
offeror in this state; and acceptance is communicated to the offeror
in this state when the offeree directs it to the offeror in this state
reasonably believing the offeror to be in this state and it is received
at the place to which it is directed.

(c) An offer to sell is not made in this state merely because (1)
the publisher circulates or there is circulated on his behalf in this
state any bona fide newspaper or other publication of general,
regular, and paid circulation which has had more than two-thirds
of its circulation outside this state during the past 12 months, or
(2) a radio or television program originating outside this state is
received in this state.

(d) An offer to sell is not made in this state merely because a
begin insert franchisor, or a end insert franchisor who is not then offering a franchise for
sale in California and has not registered an offering under the
provisions of Chapter 2 (commencing with Section begin delete 31110) end delete begin insert 31110), end insert
secures a space at a franchise trade show from which it offers
information about its products, services, or system to the general
public if begin delete a end delete begin insert the end insert franchisor begin insert or prospective franchisor end insert does begin delete both end delete begin insert all end insert
of the following:

(1) Notifies the commissioner, in a form begin delete approved end delete begin insert established end insert
by the commissioner, of its intent to attend and display its concept
at the franchise trade show at least begin delete seven end delete begin insert 14 end insert days before the begin delete show. end delete begin insert end insert
begin insert show accompanied by the following: end insert

begin insert

(A) A document, in a form approved by the commissioner, that
includes, at a minimum, all of the following:

end insert begin insert

(i) The franchise concept brand name and a brief description
of the potential franchise offering.

end insert begin insert

(ii) The legal name of the franchisor or prospective franchisor,
and the address where it is domiciled.

end insert begin insert

(iii) The names of the principal officers of the franchisor or
prospective franchisor.

end insert begin insert

(iv) The address where the franchisor or prospective franchisor
may be served legal process.

end insert begin insert

(B) If the franchisor or prospective franchisor already possesses
a current franchise disclosure document not yet registered in
California, a copy of the franchise disclosure document.

end insert

(2) Conspicuously posts in public view within its franchise trade
show booth a notice, in a form established by the commissioner,
that states, at a minimum, all of the following:

(A) The franchisor begin insert or prospective franchisor end insert is not offering a
franchise for sale in California.

(B) The franchisor begin insert or prospective franchisor end insert is not legally able
to offer a franchise for sale in California.

(C) If anyone associated with the franchisor begin insert or prospective
franchisor end insert offers a franchise for sale or solicits an offer to purchase
a franchise in California, that action should be reported to the
commissioner.

(D) The contact information of the commissioner.

begin insert

(e) The form described in paragraph (1) of subdivision (d) shall
be in the form and content prescribed by the commissioner, but,
at a minimum, shall state that it is unlawful for any person to offer
or sell a franchise in California unless the offer of the franchise
has been registered with the commissioner or is otherwise exempt.

end insert

SEC. 2.  

Section 31020 is added to the Corporations Code, to
read:

31020.  

“Franchise trade show” means an event in this begin delete state end delete
begin insert state, displaying multiple franchise brands and open to multiple
franchisors, end insert that is advertised to, and invites, the general public
to that event where franchisors who satisfy the reasonable criteria
of the franchise trade show’s organizer may secure a space from
where they can inform the members of the general public in
attendance about their existing and prospective products, services,
or systems. begin delete These franchisors may offer a franchise for sale at a
franchise trade show pursuant to the provisions of this division. end delete