BILL NUMBER: AB 2637	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 6, 2016
	AMENDED IN ASSEMBLY  MARCH 28, 2016

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 amended, 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 or other agreements contained in the disclosure document.
  include a specific statement regarding the ability to
agree to the franchise agreement and to negotiate changes to the
franchise agreement and other agreements.  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 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 disclosure document states that California law does not
prohibit a franchisor from negotiating, or require a franchisor to
negotiate, the standard franchise agreement or other agreements
contained in the disclosure document.  
   (2) The cover page of the disclosure document specifically states,
"You and the franchisor may agree to sign the forms of franchise
agreement and other agreements attached to this disclosure document.
However, California law does not prohibit you and the franchisor from
negotiating changes to the franchise agreement and other agreements,
nor does it require you or the franchisor to negotiate any changes."

   (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.

   (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 agreement containing the
relevant negotiated term. Upon the request of the commissioner, the
franchisor shall make the copies available to the commissioner for
review.
   (c) For purposes of this section, "material" means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.