BILL NUMBER: AB 2637	ENROLLED
	BILL TEXT

	PASSED THE SENATE  AUGUST 24, 2016
	PASSED THE ASSEMBLY  AUGUST 31, 2016
	AMENDED IN SENATE  JUNE 16, 2016
	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, 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 the cover page, a state cover page, or a
state addendum of a 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.


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 cover page, a state cover page, or a state addendum 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.