BILL NUMBER: SB 459	CHAPTERED  09/03/99

	CHAPTER   325
	FILED WITH SECRETARY OF STATE   SEPTEMBER 3, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 3, 1999
	PASSED THE SENATE   AUGUST 19, 1999
	PASSED THE ASSEMBLY   JULY 15, 1999
	AMENDED IN ASSEMBLY   JUNE 23, 1999

INTRODUCED BY   Senator Johnson

                        FEBRUARY 17, 1999

   An act to add Section 31108 to the Corporations Code, relating to
franchises.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 459, Johnson.  Franchise Investment Law:  sale of franchises:
exemption.
   Existing law, the Franchise Investment Law, provides that it is
unlawful for any person to offer or sell in this state any franchise
unless the offer has been registered or exempted.  Existing law makes
certain exemptions from certain provisions of the act.
   This bill would exempt from the registration requirement of the
act any offer or sale of a franchise if the franchise  involves the
adding of a new product or service line to the existing business of a
prospective franchisee, subject to certain specified requirements.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 31108 is added to the Corporations Code, to
read:
   31108.  There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110), any offer or sale of a franchise if
the franchise involves the adding of a new product or service line to
the existing business of a prospective franchisee, provided all of
the following requirements are met:
   (a) For at least the last 24 months prior to the date of sale of
the franchise, the prospective franchisee, or if the prospective
franchisee is not a natural person, an existing officer, director, or
managing agent of the prospective franchisee who has held that
position with the prospective franchisee for at least the last 24
months, has been engaged in a business offering products or services
substantially similar or related to those to be offered by the
franchised business.
   (b) The new product or service is substantially similar or related
to the product or service being offered by the prospective
franchisee's existing business.
   (c) The franchised business is to be operated from the same
business location as the prospective franchisee's existing business.

   (d) The parties anticipated, in good faith, at the time the
agreement establishing the franchise relationship was reached, that
sales resulting from the franchised business will not represent more
than 20 percent of the total sales in dollar volume of the franchisee
on an annual basis.
   (e) The prospective franchisee is not controlled by the
franchisor.
   (f) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 prior to an offer or sale of such a franchise in this state
during any calendar year in which one or more of those franchises are
sold.