BILL NUMBER: AB 2637	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Wilk

                        FEBRUARY 19, 2016

   An act to amend Section 31109.1 of the Corporations Code, relating
to business.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2637, as introduced, Wilk. Franchise investments: offer and
sale of registered franchises: registration exemption.
   The Franchise Investment Law generally regulates the offer and
sale of franchises and provides for oversight of these transactions
by the Commissioner of Business Oversight. The law prohibits, among
other things, the offer or sale of a franchise that is not registered
with the commissioner, unless exempted from this registration
requirement. The law exempts from this registration requirement the
offer and sale of a franchise on terms that are different from the
terms of a registered offer, if certain conditions are met. Those
conditions include, among others, that a prospective franchisee
receives information regarding terms the franchisor negotiated during
the previous 12 months, as specified, and that the negotiated terms,
on the whole, confer additional benefits on the franchisee.
   This bill would modify the conditions for an exemption to the
registration requirement by removing these 2 conditions and instead
imposing the condition that a disclosure document states that
California law does not prohibit a franchisor from negotiating, or
require a franchisor to negotiate, the standard franchise agreement
contained in the disclosure document. The bill would also make
technical and conforming changes to this modification, including,
among others, the removal of authority for the commissioner to
prescribe by rule or order the format and content for a franchisor to
provide information regarding terms the franchisor negotiated during
the previous 12 months.
   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 31109.1 of the Corporations Code is amended to
read:
   31109.1.  (a) There shall be exempted from the provisions of
Chapter 2 (commencing with Section 31110) the  offer and
 sale of a franchise registered under Section 31111, 31121,
or 31123 on terms different from the terms of the offer registered
thereunder if all of the following requirements are met:
   (1) The initial offer is the offer registered under Section 31111,
31121, or 31123. 
   (2) The prospective franchisee receives all of the following in a
separate written appendix to the franchise disclosure document:
 
   (A) A summary description of each material negotiated term that
was negotiated by the franchisor for a California franchise during
the 12-month period ending in the calendar month immediately
preceding the month in which the negotiated offer or sale is made
under this section.  
   (B) A statement indicating that copies of the negotiated terms are
available upon written request.  
   (C) The name, telephone number, and address of the representative
of the franchisor to whom requests for a copy of the negotiated terms
may be obtained.  
   (2) The disclosure document states that California law does not
prohibit a franchisor from negotiating, or require a franchisor to
negotiate, the standard franchise agreement contained in the
disclosure document. 
   (3) The franchisor certifies or declares in an appendix to its
application for renewal that it has complied with all of the
requirements of this section, in the event this exemption is claimed.

   (4) The negotiated terms, on the whole, confer additional benefits
on the franchisee.  
   (b) The franchisor shall provide a copy of the negotiated terms
described in subdivision (a) to the prospective franchisee within
five business days following the request of the franchisee. 

   (c) 
    (b)  The franchisor shall maintain copies of all
material negotiated terms for which this exemption is claimed for a
period of five years from the effective date of the first agreement
containing the relevant negotiated term. Upon the request of the
commissioner, the franchisor shall make the copies available to the
commissioner for review.  For purposes of this section, the
commissioner may prescribe by rule or order the format and content of
the summary description of the negotiated terms required by
subparagraph (A) of paragraph (2) of subdivision (a). 

   (d) 
    (c)  For purposes of this section, "material" means that
a reasonable franchisee would view the terms as important in
negotiating the franchise.