BILL ANALYSIS Ó
AB 1782
Page 1
Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
1782 (Maienschein) - As Amended March 10, 2016
-----------------------------------------------------------------
|Policy |Judiciary |Vote:|8 - 0 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill authorizes a company that has not registered with the
Department of Business Oversight (DBO) to sell franchises to
nevertheless exhibit at a franchise trade show in California, as
long as the company complies with the following:
1)Notifies the DBO commissioner of its intent to attend and
display at least 14 days prior to the trade show, by
AB 1782
Page 2
submitting a form established by the commissioner and
containing specified information about the company.
2)Post in public view at the trade show a notice that the
company is not offering and is not legally able to offer a
franchise for sale in California.
FISCAL EFFECT:
Minor absorbable costs to the DBO.
COMMENTS:
Background and Purpose. The California Franchise Investment Law
(CFIL) generally prohibits the sale of a franchise in California
unless prior to the sale the franchisor has, among other things,
prepared a franchise disclosure document (FDD) and registered
with the Commissioner of the DBO to sell franchises in
California. The DBO considers a franchisor's exhibit at a trade
show to be an illegal offer of a franchise, whether or not a
sale occurs, if the franchisor has not first registered their
offering with the DBO pursuant to the CFIL. The ability to
exhibit a booth at a franchise trade show thus requires a
prospective franchisor to comply with the full CFIL process for
registering a franchise--even if the company does not yet plan
to offer or sell franchises in California. The author contends
that because of the cost and complexity of the registration
process, this requirement unnecessarily discourages some
potential franchisors, particularly foreign or out-of-state
franchise companies or young startup companies seeking to
measure interest in their brands or concepts, from using trade
shows to explore the potential for expansion into California.
AB 1782
Page 3
This bill, sponsored by the Business Law Section of the State
Bar, authorizes prospective franchisees that have not registered
with the DBO to nevertheless exhibit at franchise trade shows in
California, as long as specified disclosures are made to the DBO
and to trade show attendees.
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081