31100. There shall be exempted from any or all of the provisions of
Chapter 2 (commencing with Section 31110) any other transaction
which the commissioner by rule exempts as not being comprehended
within the purposes of this law and the registration of which the
commissioner finds is not necessary or appropriate in the public
interest or for the protection of investors.
31101. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor complies with each of the following
minimum net worth, experience, disclosure, and notice filing
requirements:
(a) Net worth. The franchisor and, when necessary, a corporation
owning at least 80 percent of the franchisor (parent) meet one of the
following net worth requirements, according to financial statements
for the fiscal year just ended. The franchisor and the parent, when
necessary, may rely upon the immediately preceding fiscal year's
audited financial statement for 15 months from that fiscal year end
date.
(1) The franchisor has a net worth on a consolidated basis of not
less than five million dollars ($5,000,000), according to its audited
financial statement.
(2) The franchisor has a net worth of not less than one million
dollars ($1,000,000) and its parent has a net worth of five million
dollars ($5,000,000), according to the audited financial statements
of the franchisor and its parent, respectively.
(3) The franchisor has a net worth of one million dollars
($1,000,000), according to its unaudited financial statement, and the
parent has a net worth on a consolidated basis of not less than five
million dollars ($5,000,000), according to its audited financial
statement, and the parent absolutely and unconditionally guarantees
to assume the duties and obligations of the franchisor under the
franchise agreement should the franchisor become unable to perform
its duties and obligations.
(b) Experience. The franchisor or a corporation owning at least 80
percent of the franchisor (parent) complies with one or more of the
following conditions throughout the five-year period immediately
preceding the offer and sale of the franchise, or complies with one
of the following conditions during part of the period and one or more
of the following conditions during the balance of the period:
(1) The franchisor has had at least 25 franchisees conducting
business which is the subject of the franchise.
(2) The franchisor has conducted business which is the subject of
the franchise.
(3) The parent has had at least 25 franchisees conducting business
which is the subject of the franchise.
(4) The parent has conducted business which is the subject of the
franchise.
(c) Disclosure. (1) Except as provided in subparagraph (2), the
franchisor discloses in writing to each prospective franchisee, at
least 10 business days prior to the execution by the prospective
franchisee of any binding franchise or other agreement, or at least
10 business days prior to the receipt of any consideration, the
following information:
(A) The name of the franchisor, the name under which the
franchisor is doing or intends to do business, and the name of any
parent or affiliated company that will engage in business
transactions with franchisees.
(B) The franchisor's principal business address and the name and
address of its agent in the State of California authorized to receive
service of process.
(C) The business form of the franchisor, whether corporate,
partnership, or otherwise.
(D) The business experience of the franchisor, including the
length of time the franchisor (i) has conducted a business of the
type to be operated by the franchisees, (ii) has granted franchises
for such business, and (iii) has granted franchises in other lines of
business.
(E) A copy of the typical franchise contract or agreement proposed
for use or in use in this state.
(F) A statement of the franchise fee charged, the proposed
application of the proceeds of such fee by the franchisor, and the
formula by which the amount of the fee is determined if the fee is
not the same in all cases.
(G) A statement describing any payments or fees other than
franchise fees that the franchisee or subfranchisor is required to
pay to the franchisor, including royalties and payments or fees which
the franchisor collects in whole or in part on behalf of a third
party or parties.
(H) A statement of the conditions under which the franchise
agreement may be terminated or renewal refused, or repurchased at the
option of the franchisor.
(I) A statement as to whether, by the terms of the franchise
agreement or by other device or practice, the franchisee or
subfranchisor is required to purchase from the franchisor or his or
her designee services, supplies, products, fixtures, or other goods
relating to the establishment or operation of the franchise business,
together with a description thereof.
(J) A statement as to whether, by the terms of the franchise
agreement or other device or practice, the franchisee is limited in
the goods or services offered by him or her to his or her customers.
(K) A statement of the terms and conditions of any financing
arrangements when offered directly or indirectly by the franchisor or
his or her agent or affiliate.
(L) A statement of any past or present practice or of any intent
of the franchisor to sell, assign, or discount to a third party any
note, contract, or other obligation of the franchisee or
subfranchisor in whole or in part.
(M) If any statement of estimated or projected franchisee earnings
is used, a statement of such estimation or projection and the data
upon which it is based.
(N) A statement as to whether franchisees or subfranchisors
receive an exclusive area or territory.
(O) A copy of the financial statement or statements required by
subdivision (a).
(P) A copy of the unconditional guaranty, if applicable, required
by paragraph (3) of subdivision (a).
(2) In the case of a material modification of an existing
franchise, the franchisor discloses in writing to each franchisee
information concerning the specific sections of the franchise
agreement proposed to be modified and such additional information as
may be required by rule or order of the commissioner. Any agreement
by such franchisee to such material modifications shall not be
binding upon the franchisee if the franchisee, within 10 business
days after the receipt of such writing identifying the material
modification, notifies the franchisor in writing that the agreement
to such modification is rescinded. A writing identifying the material
modification is received when delivered to the franchisee. A written
notice by the franchisee rescinding an agreement to a material
modification is effective when delivered to the franchisor or when
deposited in the mail, postage prepaid, and addressed to the
franchisor in accordance with any notice provisions in the franchise
agreement, or when delivered or mailed to the person designated in
the franchise agreement for the receipt of notices on behalf of the
franchisor.
(d) Notice filing. The franchisor has filed with the commissioner
a notice of exemption and paid the fee required by subdivision (f) of
Section 31500 prior to an offer or sale of a franchise in this state
during any calendar year in which one or more franchises are sold,
excluding any material modification.
31102. The offer or sale of a franchise by a franchisee for his own
account or the offer or sale of the entire area franchise owned by a
subfranchisor for his own account, is exempted from the provisions
of Section 31110 if the sale is not effected by or through a
franchisor. A sale is not effected by or through a franchisor merely
because a franchisor has a right to approve or disapprove a different
franchisee.
31103. This division shall not be applicable to any transaction
relating to a bank credit card plan. "Bank credit card plan" means a
credit card plan in which the issuers of credit cards, as defined in
subdivision (a) of Section 1747.02 of the Civil Code are only: banks
regulated by or under the supervision of the Federal Reserve Board,
the Federal Deposit Insurance Corporation, the Comptroller of the
Currency of the United States, or the Commissioner of Financial
Institutions of this state under Division 1 (commencing with Section
99) of the Financial Code; or, persons controlling these banks,
provided that the assets of such a bank or banks represent a majority
of the assets on a consolidated basis of any holding company system
of which the card issuers may be a party; or, persons controlled by
these banks.
31104. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor:
(a) Is a petroleum corporation or distributor who is a wholesale
distributor or marketer of petroleum products; doing business
continuously for the past five years and who does not require an
advance of funds in the nature of a fee or lease for such franchise
agreements; not engaged in the production or the refining of
petroleum; and
(b) Complies with the provisions of subdivisions (c) and (d) of
Section 31101.
(c) For the purposes of subdivision (a) of this section:
(1) A "wholesale distributor" or "marketer" means any entity
which, for wholesale, purchases or receives through transfer, or
otherwise obtains, by consignment or otherwise, refined petroleum
products and resells or otherwise transfers such products, without
substantially changing their form, to other purchasers.
(2) An "advance of funds" means (A) a fee or lease for a franchise
agreement, and (B) does not mean rent for the possession or use, or
both, of premises or property, the purchase of inventory for resale
or supplies, utility deposits, and other consideration or
expenditures for the formation or operation, or both, of a wholesale
distributor or marketer entity.
31105. Any offer, sale, or other transfer of a franchise, or any
interest in a franchise, to a resident of another state or any
territory or foreign country, shall be exempted from the provisions
of Chapter 2 (commencing with Section 31110) of this part, if all
locations from which sales, leases or other transactions between the
franchised business and its customers are made, or goods or services
are distributed, are physically located outside this state.
31106. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part, any offer, sale, or
other transfer of a franchise or any interest in a franchise,
provided that the offer, sale or transfer meets the requirements in
subdivisions (a) and (b):
(a) Any of the following conditions apply:
(1) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
both of the following:
(A) The owner or owners have had, within the seven years before
the date of the sale or other transaction, at least 24 months'
experience being responsible for the financial and operational
aspects of a business offering products or services substantially
similar to those offered by the franchised business.
(B) The owner or owners are not controlled by the franchisor.
(2) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
both of the following:
(A) The owner or owners are, or have been within 60 days prior to
the sale or other transaction, an officer, director, managing agent,
or an owner of at least a 25 percent interest in the franchisor for
at least 24 months.
(B) The owner or owners are not controlled by the franchisor.
(3) The offer, sale, or other transfer is of an additional
franchise to an existing franchisee of the franchisor, or to an
entity, one or more of the officers, directors, managing agents or
owners of at least a 25 percent interest of which is an existing
franchisee of the franchisor; provided that, in either case, for 24
months or more the franchisee, or the qualifying person, has been
engaged in a business offering products or services substantially
similar to those to be offered by the franchise being sold, or
otherwise transferred.
(b) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 no later than 15 calendar days after the sale of a franchise in
this state pursuant to this section.
31107. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part, any offer (but not the
sale) by a franchisor of a franchise while an application for renewal
or amendment is pending if the prospective franchisee receives all
of the following:
(a) The offering circular and its exhibits as filed with the
commissioner with the application for renewal or amendment.
(b) A written statement from the franchisor that (1) the filing
has been made but is not effective, (2) the information in the
offering circular and exhibits has not been reviewed by the
commissioner, and (3) the franchisor will deliver to the prospective
franchisee an effective offering circular and exhibits at least 10
business days prior to execution by the prospective franchisee of a
binding agreement or payment of any consideration to the franchisor,
or any person affiliated with the franchisor, whichever occurs first,
showing all material changes from the offering circular and exhibits
received by the prospective franchisee under subdivision (a) of this
section.
(c) The offering circular and exhibits in accordance with
paragraph (3) of subdivision (b) of this section.
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.
31109. Any offer or sale of a franchise that meets all of the
following requirements shall be exempt from Chapter 2 (commencing
with Section 31110):
(a) Each and every purchaser of the franchise is one of the
following:
(1) Any partner, executive officer, or director of the franchisor,
or any executive officer of its corporate general partner if the
franchisor is a partnership, or any manager if the franchisor is a
limited liability company.
(2) Any entity with total assets exceeding five million dollars
($5,000,000) according to its most recent financial statements and
not specifically formed for the purpose of acquiring the franchise
offered. For purposes of this section, "entity" shall mean an
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, limited
liability company, or partnership. The financial statements referred
to in this paragraph shall meet both of the following requirements:
(A) Be as of date not more than 90 days prior to the earlier of
either the date on which the first prospective purchaser signs any
binding franchise or other agreement with the franchisor in
connection with the award of the franchise, or the date on which the
franchisor receives any consideration from the first prospective
purchaser in connection with the award of the franchise.
(B) Be prepared in accordance with either of the following:
(i) Generally accepted accounting principles and, if the entity
has consolidated subsidiaries, on a consolidated basis.
(ii) The rules and requirements of the Securities and Exchange
Commission, whether or not required by law to be prepared in
accordance with those rules and requirements.
(3) Any natural person whose net worth, or joint net worth with
that person's spouse, exceeds one million dollars ($1,000,000) at the
time of his or her purchase of the franchise, excluding the value of
that person's personal residence, any and all retirement or pension
plan accounts or benefits, home furnishings, and automobiles.
(4) Any natural person whose gross income exceeds three hundred
thousand dollars ($300,000) per year in each of the two most recent
years, or whose joint gross income with that person's spouse exceeds
five hundred thousand dollars ($500,000) per year in each of those
years, and who reasonably expects to reach the same income level in
the current year.
(5) Any entity, in which all of the equity owners are persons or
entities described in either paragraph (1), (2), (3), or (4).
(b) Each and every purchaser of the franchise has knowledge and
experience in financial and business matters, either alone or with
professional advisers of the purchaser who are unaffiliated with, and
not directly or indirectly compensated by, the franchisor or an
affiliate or selling agent of the franchisor, such that the
franchisor reasonably believes, based on reasonable inquiry before
the sale, that each and every purchaser has the capacity to evaluate
the merits and risks of, and protect their own interests in, the
franchise investment.
(c) Each and every purchaser of the franchise purchases the
franchise for the purchaser's own account, or a trust account if the
purchaser is a trustee, for the purpose of conducting the business as
a franchise and not with a view to, or for a sale in connection
with, any resale or distribution of the franchise or any interest in
the franchise.
(d) The immediate cash payment required from a purchaser of the
franchise who is a natural person, upon the purchase of the
franchise, shall not exceed 10 percent of that person's net worth or
joint net worth with that person's spouse, exclusive of that person's
personal residence, any and all retirement or pension accounts or
benefits, home furnishings and automobiles.
(e) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 prior to any offer or sale of a franchise in this state for
which the exemption is claimed during any calendar year in which one
or more franchises are sold, excluding any material modification.
(f) No franchisor or any of its officers, directors, employees, or
agents shall form, organize, engage, or assist any person to
purchase a franchise for resale or distribution to avoid the
registration requirements of Chapter 2 (commencing with Section
31110).
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 offering circular:
(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.
(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) 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) For purposes of this section, "material" means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.
31100. There shall be exempted from any or all of the provisions of
Chapter 2 (commencing with Section 31110) any other transaction
which the commissioner by rule exempts as not being comprehended
within the purposes of this law and the registration of which the
commissioner finds is not necessary or appropriate in the public
interest or for the protection of investors.
31101. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor complies with each of the following
minimum net worth, experience, disclosure, and notice filing
requirements:
(a) Net worth. The franchisor and, when necessary, a corporation
owning at least 80 percent of the franchisor (parent) meet one of the
following net worth requirements, according to financial statements
for the fiscal year just ended. The franchisor and the parent, when
necessary, may rely upon the immediately preceding fiscal year's
audited financial statement for 15 months from that fiscal year end
date.
(1) The franchisor has a net worth on a consolidated basis of not
less than five million dollars ($5,000,000), according to its audited
financial statement.
(2) The franchisor has a net worth of not less than one million
dollars ($1,000,000) and its parent has a net worth of five million
dollars ($5,000,000), according to the audited financial statements
of the franchisor and its parent, respectively.
(3) The franchisor has a net worth of one million dollars
($1,000,000), according to its unaudited financial statement, and the
parent has a net worth on a consolidated basis of not less than five
million dollars ($5,000,000), according to its audited financial
statement, and the parent absolutely and unconditionally guarantees
to assume the duties and obligations of the franchisor under the
franchise agreement should the franchisor become unable to perform
its duties and obligations.
(b) Experience. The franchisor or a corporation owning at least 80
percent of the franchisor (parent) complies with one or more of the
following conditions throughout the five-year period immediately
preceding the offer and sale of the franchise, or complies with one
of the following conditions during part of the period and one or more
of the following conditions during the balance of the period:
(1) The franchisor has had at least 25 franchisees conducting
business which is the subject of the franchise.
(2) The franchisor has conducted business which is the subject of
the franchise.
(3) The parent has had at least 25 franchisees conducting business
which is the subject of the franchise.
(4) The parent has conducted business which is the subject of the
franchise.
(c) Disclosure. (1) Except as provided in subparagraph (2), the
franchisor discloses in writing to each prospective franchisee, at
least 10 business days prior to the execution by the prospective
franchisee of any binding franchise or other agreement, or at least
10 business days prior to the receipt of any consideration, the
following information:
(A) The name of the franchisor, the name under which the
franchisor is doing or intends to do business, and the name of any
parent or affiliated company that will engage in business
transactions with franchisees.
(B) The franchisor's principal business address and the name and
address of its agent in the State of California authorized to receive
service of process.
(C) The business form of the franchisor, whether corporate,
partnership, or otherwise.
(D) The business experience of the franchisor, including the
length of time the franchisor (i) has conducted a business of the
type to be operated by the franchisees, (ii) has granted franchises
for such business, and (iii) has granted franchises in other lines of
business.
(E) A copy of the typical franchise contract or agreement proposed
for use or in use in this state.
(F) A statement of the franchise fee charged, the proposed
application of the proceeds of such fee by the franchisor, and the
formula by which the amount of the fee is determined if the fee is
not the same in all cases.
(G) A statement describing any payments or fees other than
franchise fees that the franchisee or subfranchisor is required to
pay to the franchisor, including royalties and payments or fees which
the franchisor collects in whole or in part on behalf of a third
party or parties.
(H) A statement of the conditions under which the franchise
agreement may be terminated or renewal refused, or repurchased at the
option of the franchisor.
(I) A statement as to whether, by the terms of the franchise
agreement or by other device or practice, the franchisee or
subfranchisor is required to purchase from the franchisor or his or
her designee services, supplies, products, fixtures, or other goods
relating to the establishment or operation of the franchise business,
together with a description thereof.
(J) A statement as to whether, by the terms of the franchise
agreement or other device or practice, the franchisee is limited in
the goods or services offered by him or her to his or her customers.
(K) A statement of the terms and conditions of any financing
arrangements when offered directly or indirectly by the franchisor or
his or her agent or affiliate.
(L) A statement of any past or present practice or of any intent
of the franchisor to sell, assign, or discount to a third party any
note, contract, or other obligation of the franchisee or
subfranchisor in whole or in part.
(M) If any statement of estimated or projected franchisee earnings
is used, a statement of such estimation or projection and the data
upon which it is based.
(N) A statement as to whether franchisees or subfranchisors
receive an exclusive area or territory.
(O) A copy of the financial statement or statements required by
subdivision (a).
(P) A copy of the unconditional guaranty, if applicable, required
by paragraph (3) of subdivision (a).
(2) In the case of a material modification of an existing
franchise, the franchisor discloses in writing to each franchisee
information concerning the specific sections of the franchise
agreement proposed to be modified and such additional information as
may be required by rule or order of the commissioner. Any agreement
by such franchisee to such material modifications shall not be
binding upon the franchisee if the franchisee, within 10 business
days after the receipt of such writing identifying the material
modification, notifies the franchisor in writing that the agreement
to such modification is rescinded. A writing identifying the material
modification is received when delivered to the franchisee. A written
notice by the franchisee rescinding an agreement to a material
modification is effective when delivered to the franchisor or when
deposited in the mail, postage prepaid, and addressed to the
franchisor in accordance with any notice provisions in the franchise
agreement, or when delivered or mailed to the person designated in
the franchise agreement for the receipt of notices on behalf of the
franchisor.
(d) Notice filing. The franchisor has filed with the commissioner
a notice of exemption and paid the fee required by subdivision (f) of
Section 31500 prior to an offer or sale of a franchise in this state
during any calendar year in which one or more franchises are sold,
excluding any material modification.
31102. The offer or sale of a franchise by a franchisee for his own
account or the offer or sale of the entire area franchise owned by a
subfranchisor for his own account, is exempted from the provisions
of Section 31110 if the sale is not effected by or through a
franchisor. A sale is not effected by or through a franchisor merely
because a franchisor has a right to approve or disapprove a different
franchisee.
31103. This division shall not be applicable to any transaction
relating to a bank credit card plan. "Bank credit card plan" means a
credit card plan in which the issuers of credit cards, as defined in
subdivision (a) of Section 1747.02 of the Civil Code are only: banks
regulated by or under the supervision of the Federal Reserve Board,
the Federal Deposit Insurance Corporation, the Comptroller of the
Currency of the United States, or the Commissioner of Financial
Institutions of this state under Division 1 (commencing with Section
99) of the Financial Code; or, persons controlling these banks,
provided that the assets of such a bank or banks represent a majority
of the assets on a consolidated basis of any holding company system
of which the card issuers may be a party; or, persons controlled by
these banks.
31104. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor:
(a) Is a petroleum corporation or distributor who is a wholesale
distributor or marketer of petroleum products; doing business
continuously for the past five years and who does not require an
advance of funds in the nature of a fee or lease for such franchise
agreements; not engaged in the production or the refining of
petroleum; and
(b) Complies with the provisions of subdivisions (c) and (d) of
Section 31101.
(c) For the purposes of subdivision (a) of this section:
(1) A "wholesale distributor" or "marketer" means any entity
which, for wholesale, purchases or receives through transfer, or
otherwise obtains, by consignment or otherwise, refined petroleum
products and resells or otherwise transfers such products, without
substantially changing their form, to other purchasers.
(2) An "advance of funds" means (A) a fee or lease for a franchise
agreement, and (B) does not mean rent for the possession or use, or
both, of premises or property, the purchase of inventory for resale
or supplies, utility deposits, and other consideration or
expenditures for the formation or operation, or both, of a wholesale
distributor or marketer entity.
31105. Any offer, sale, or other transfer of a franchise, or any
interest in a franchise, to a resident of another state or any
territory or foreign country, shall be exempted from the provisions
of Chapter 2 (commencing with Section 31110) of this part, if all
locations from which sales, leases or other transactions between the
franchised business and its customers are made, or goods or services
are distributed, are physically located outside this state.
31106. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part, any offer, sale, or
other transfer of a franchise or any interest in a franchise,
provided that the offer, sale or transfer meets the requirements in
subdivisions (a) and (b):
(a) Any of the following conditions apply:
(1) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
both of the following:
(A) The owner or owners have had, within the seven years before
the date of the sale or other transaction, at least 24 months'
experience being responsible for the financial and operational
aspects of a business offering products or services substantially
similar to those offered by the franchised business.
(B) The owner or owners are not controlled by the franchisor.
(2) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
both of the following:
(A) The owner or owners are, or have been within 60 days prior to
the sale or other transaction, an officer, director, managing agent,
or an owner of at least a 25 percent interest in the franchisor for
at least 24 months.
(B) The owner or owners are not controlled by the franchisor.
(3) The offer, sale, or other transfer is of an additional
franchise to an existing franchisee of the franchisor, or to an
entity, one or more of the officers, directors, managing agents or
owners of at least a 25 percent interest of which is an existing
franchisee of the franchisor; provided that, in either case, for 24
months or more the franchisee, or the qualifying person, has been
engaged in a business offering products or services substantially
similar to those to be offered by the franchise being sold, or
otherwise transferred.
(b) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 no later than 15 calendar days after the sale of a franchise in
this state pursuant to this section.
31107. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part, any offer (but not the
sale) by a franchisor of a franchise while an application for renewal
or amendment is pending if the prospective franchisee receives all
of the following:
(a) The offering circular and its exhibits as filed with the
commissioner with the application for renewal or amendment.
(b) A written statement from the franchisor that (1) the filing
has been made but is not effective, (2) the information in the
offering circular and exhibits has not been reviewed by the
commissioner, and (3) the franchisor will deliver to the prospective
franchisee an effective offering circular and exhibits at least 10
business days prior to execution by the prospective franchisee of a
binding agreement or payment of any consideration to the franchisor,
or any person affiliated with the franchisor, whichever occurs first,
showing all material changes from the offering circular and exhibits
received by the prospective franchisee under subdivision (a) of this
section.
(c) The offering circular and exhibits in accordance with
paragraph (3) of subdivision (b) of this section.
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.
31109. Any offer or sale of a franchise that meets all of the
following requirements shall be exempt from Chapter 2 (commencing
with Section 31110):
(a) Each and every purchaser of the franchise is one of the
following:
(1) Any partner, executive officer, or director of the franchisor,
or any executive officer of its corporate general partner if the
franchisor is a partnership, or any manager if the franchisor is a
limited liability company.
(2) Any entity with total assets exceeding five million dollars
($5,000,000) according to its most recent financial statements and
not specifically formed for the purpose of acquiring the franchise
offered. For purposes of this section, "entity" shall mean an
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, limited
liability company, or partnership. The financial statements referred
to in this paragraph shall meet both of the following requirements:
(A) Be as of date not more than 90 days prior to the earlier of
either the date on which the first prospective purchaser signs any
binding franchise or other agreement with the franchisor in
connection with the award of the franchise, or the date on which the
franchisor receives any consideration from the first prospective
purchaser in connection with the award of the franchise.
(B) Be prepared in accordance with either of the following:
(i) Generally accepted accounting principles and, if the entity
has consolidated subsidiaries, on a consolidated basis.
(ii) The rules and requirements of the Securities and Exchange
Commission, whether or not required by law to be prepared in
accordance with those rules and requirements.
(3) Any natural person whose net worth, or joint net worth with
that person's spouse, exceeds one million dollars ($1,000,000) at the
time of his or her purchase of the franchise, excluding the value of
that person's personal residence, any and all retirement or pension
plan accounts or benefits, home furnishings, and automobiles.
(4) Any natural person whose gross income exceeds three hundred
thousand dollars ($300,000) per year in each of the two most recent
years, or whose joint gross income with that person's spouse exceeds
five hundred thousand dollars ($500,000) per year in each of those
years, and who reasonably expects to reach the same income level in
the current year.
(5) Any entity, in which all of the equity owners are persons or
entities described in either paragraph (1), (2), (3), or (4).
(b) Each and every purchaser of the franchise has knowledge and
experience in financial and business matters, either alone or with
professional advisers of the purchaser who are unaffiliated with, and
not directly or indirectly compensated by, the franchisor or an
affiliate or selling agent of the franchisor, such that the
franchisor reasonably believes, based on reasonable inquiry before
the sale, that each and every purchaser has the capacity to evaluate
the merits and risks of, and protect their own interests in, the
franchise investment.
(c) Each and every purchaser of the franchise purchases the
franchise for the purchaser's own account, or a trust account if the
purchaser is a trustee, for the purpose of conducting the business as
a franchise and not with a view to, or for a sale in connection
with, any resale or distribution of the franchise or any interest in
the franchise.
(d) The immediate cash payment required from a purchaser of the
franchise who is a natural person, upon the purchase of the
franchise, shall not exceed 10 percent of that person's net worth or
joint net worth with that person's spouse, exclusive of that person's
personal residence, any and all retirement or pension accounts or
benefits, home furnishings and automobiles.
(e) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 prior to any offer or sale of a franchise in this state for
which the exemption is claimed during any calendar year in which one
or more franchises are sold, excluding any material modification.
(f) No franchisor or any of its officers, directors, employees, or
agents shall form, organize, engage, or assist any person to
purchase a franchise for resale or distribution to avoid the
registration requirements of Chapter 2 (commencing with Section
31110).
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 offering circular:
(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.
(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) 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) For purposes of this section, "material" means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.
31100. There shall be exempted from any or all of the provisions of
Chapter 2 (commencing with Section 31110) any other transaction
which the commissioner by rule exempts as not being comprehended
within the purposes of this law and the registration of which the
commissioner finds is not necessary or appropriate in the public
interest or for the protection of investors.
31101. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor complies with each of the following
minimum net worth, experience, disclosure, and notice filing
requirements:
(a) Net worth. The franchisor and, when necessary, a corporation
owning at least 80 percent of the franchisor (parent) meet one of the
following net worth requirements, according to financial statements
for the fiscal year just ended. The franchisor and the parent, when
necessary, may rely upon the immediately preceding fiscal year's
audited financial statement for 15 months from that fiscal year end
date.
(1) The franchisor has a net worth on a consolidated basis of not
less than five million dollars ($5,000,000), according to its audited
financial statement.
(2) The franchisor has a net worth of not less than one million
dollars ($1,000,000) and its parent has a net worth of five million
dollars ($5,000,000), according to the audited financial statements
of the franchisor and its parent, respectively.
(3) The franchisor has a net worth of one million dollars
($1,000,000), according to its unaudited financial statement, and the
parent has a net worth on a consolidated basis of not less than five
million dollars ($5,000,000), according to its audited financial
statement, and the parent absolutely and unconditionally guarantees
to assume the duties and obligations of the franchisor under the
franchise agreement should the franchisor become unable to perform
its duties and obligations.
(b) Experience. The franchisor or a corporation owning at least 80
percent of the franchisor (parent) complies with one or more of the
following conditions throughout the five-year period immediately
preceding the offer and sale of the franchise, or complies with one
of the following conditions during part of the period and one or more
of the following conditions during the balance of the period:
(1) The franchisor has had at least 25 franchisees conducting
business which is the subject of the franchise.
(2) The franchisor has conducted business which is the subject of
the franchise.
(3) The parent has had at least 25 franchisees conducting business
which is the subject of the franchise.
(4) The parent has conducted business which is the subject of the
franchise.
(c) Disclosure. (1) Except as provided in subparagraph (2), the
franchisor discloses in writing to each prospective franchisee, at
least 10 business days prior to the execution by the prospective
franchisee of any binding franchise or other agreement, or at least
10 business days prior to the receipt of any consideration, the
following information:
(A) The name of the franchisor, the name under which the
franchisor is doing or intends to do business, and the name of any
parent or affiliated company that will engage in business
transactions with franchisees.
(B) The franchisor's principal business address and the name and
address of its agent in the State of California authorized to receive
service of process.
(C) The business form of the franchisor, whether corporate,
partnership, or otherwise.
(D) The business experience of the franchisor, including the
length of time the franchisor (i) has conducted a business of the
type to be operated by the franchisees, (ii) has granted franchises
for such business, and (iii) has granted franchises in other lines of
business.
(E) A copy of the typical franchise contract or agreement proposed
for use or in use in this state.
(F) A statement of the franchise fee charged, the proposed
application of the proceeds of such fee by the franchisor, and the
formula by which the amount of the fee is determined if the fee is
not the same in all cases.
(G) A statement describing any payments or fees other than
franchise fees that the franchisee or subfranchisor is required to
pay to the franchisor, including royalties and payments or fees which
the franchisor collects in whole or in part on behalf of a third
party or parties.
(H) A statement of the conditions under which the franchise
agreement may be terminated or renewal refused, or repurchased at the
option of the franchisor.
(I) A statement as to whether, by the terms of the franchise
agreement or by other device or practice, the franchisee or
subfranchisor is required to purchase from the franchisor or his or
her designee services, supplies, products, fixtures, or other goods
relating to the establishment or operation of the franchise business,
together with a description thereof.
(J) A statement as to whether, by the terms of the franchise
agreement or other device or practice, the franchisee is limited in
the goods or services offered by him or her to his or her customers.
(K) A statement of the terms and conditions of any financing
arrangements when offered directly or indirectly by the franchisor or
his or her agent or affiliate.
(L) A statement of any past or present practice or of any intent
of the franchisor to sell, assign, or discount to a third party any
note, contract, or other obligation of the franchisee or
subfranchisor in whole or in part.
(M) If any statement of estimated or projected franchisee earnings
is used, a statement of such estimation or projection and the data
upon which it is based.
(N) A statement as to whether franchisees or subfranchisors
receive an exclusive area or territory.
(O) A copy of the financial statement or statements required by
subdivision (a).
(P) A copy of the unconditional guaranty, if applicable, required
by paragraph (3) of subdivision (a).
(2) In the case of a material modification of an existing
franchise, the franchisor discloses in writing to each franchisee
information concerning the specific sections of the franchise
agreement proposed to be modified and such additional information as
may be required by rule or order of the commissioner. Any agreement
by such franchisee to such material modifications shall not be
binding upon the franchisee if the franchisee, within 10 business
days after the receipt of such writing identifying the material
modification, notifies the franchisor in writing that the agreement
to such modification is rescinded. A writing identifying the material
modification is received when delivered to the franchisee. A written
notice by the franchisee rescinding an agreement to a material
modification is effective when delivered to the franchisor or when
deposited in the mail, postage prepaid, and addressed to the
franchisor in accordance with any notice provisions in the franchise
agreement, or when delivered or mailed to the person designated in
the franchise agreement for the receipt of notices on behalf of the
franchisor.
(d) Notice filing. The franchisor has filed with the commissioner
a notice of exemption and paid the fee required by subdivision (f) of
Section 31500 prior to an offer or sale of a franchise in this state
during any calendar year in which one or more franchises are sold,
excluding any material modification.
31102. The offer or sale of a franchise by a franchisee for his own
account or the offer or sale of the entire area franchise owned by a
subfranchisor for his own account, is exempted from the provisions
of Section 31110 if the sale is not effected by or through a
franchisor. A sale is not effected by or through a franchisor merely
because a franchisor has a right to approve or disapprove a different
franchisee.
31103. This division shall not be applicable to any transaction
relating to a bank credit card plan. "Bank credit card plan" means a
credit card plan in which the issuers of credit cards, as defined in
subdivision (a) of Section 1747.02 of the Civil Code are only: banks
regulated by or under the supervision of the Federal Reserve Board,
the Federal Deposit Insurance Corporation, the Comptroller of the
Currency of the United States, or the Commissioner of Financial
Institutions of this state under Division 1 (commencing with Section
99) of the Financial Code; or, persons controlling these banks,
provided that the assets of such a bank or banks represent a majority
of the assets on a consolidated basis of any holding company system
of which the card issuers may be a party; or, persons controlled by
these banks.
31104. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor:
(a) Is a petroleum corporation or distributor who is a wholesale
distributor or marketer of petroleum products; doing business
continuously for the past five years and who does not require an
advance of funds in the nature of a fee or lease for such franchise
agreements; not engaged in the production or the refining of
petroleum; and
(b) Complies with the provisions of subdivisions (c) and (d) of
Section 31101.
(c) For the purposes of subdivision (a) of this section:
(1) A "wholesale distributor" or "marketer" means any entity
which, for wholesale, purchases or receives through transfer, or
otherwise obtains, by consignment or otherwise, refined petroleum
products and resells or otherwise transfers such products, without
substantially changing their form, to other purchasers.
(2) An "advance of funds" means (A) a fee or lease for a franchise
agreement, and (B) does not mean rent for the possession or use, or
both, of premises or property, the purchase of inventory for resale
or supplies, utility deposits, and other consideration or
expenditures for the formation or operation, or both, of a wholesale
distributor or marketer entity.
31105. Any offer, sale, or other transfer of a franchise, or any
interest in a franchise, to a resident of another state or any
territory or foreign country, shall be exempted from the provisions
of Chapter 2 (commencing with Section 31110) of this part, if all
locations from which sales, leases or other transactions between the
franchised business and its customers are made, or goods or services
are distributed, are physically located outside this state.
31106. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part, any offer, sale, or
other transfer of a franchise or any interest in a franchise,
provided that the offer, sale or transfer meets the requirements in
subdivisions (a) and (b):
(a) Any of the following conditions apply:
(1) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
both of the following:
(A) The owner or owners have had, within the seven years before
the date of the sale or other transaction, at least 24 months'
experience being responsible for the financial and operational
aspects of a business offering products or services substantially
similar to those offered by the franchised business.
(B) The owner or owners are not controlled by the franchisor.
(2) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
both of the following:
(A) The owner or owners are, or have been within 60 days prior to
the sale or other transaction, an officer, director, managing agent,
or an owner of at least a 25 percent interest in the franchisor for
at least 24 months.
(B) The owner or owners are not controlled by the franchisor.
(3) The offer, sale, or other transfer is of an additional
franchise to an existing franchisee of the franchisor, or to an
entity, one or more of the officers, directors, managing agents or
owners of at least a 25 percent interest of which is an existing
franchisee of the franchisor; provided that, in either case, for 24
months or more the franchisee, or the qualifying person, has been
engaged in a business offering products or services substantially
similar to those to be offered by the franchise being sold, or
otherwise transferred.
(b) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 no later than 15 calendar days after the sale of a franchise in
this state pursuant to this section.
31107. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part, any offer (but not the
sale) by a franchisor of a franchise while an application for renewal
or amendment is pending if the prospective franchisee receives all
of the following:
(a) The offering circular and its exhibits as filed with the
commissioner with the application for renewal or amendment.
(b) A written statement from the franchisor that (1) the filing
has been made but is not effective, (2) the information in the
offering circular and exhibits has not been reviewed by the
commissioner, and (3) the franchisor will deliver to the prospective
franchisee an effective offering circular and exhibits at least 10
business days prior to execution by the prospective franchisee of a
binding agreement or payment of any consideration to the franchisor,
or any person affiliated with the franchisor, whichever occurs first,
showing all material changes from the offering circular and exhibits
received by the prospective franchisee under subdivision (a) of this
section.
(c) The offering circular and exhibits in accordance with
paragraph (3) of subdivision (b) of this section.
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.
31109. Any offer or sale of a franchise that meets all of the
following requirements shall be exempt from Chapter 2 (commencing
with Section 31110):
(a) Each and every purchaser of the franchise is one of the
following:
(1) Any partner, executive officer, or director of the franchisor,
or any executive officer of its corporate general partner if the
franchisor is a partnership, or any manager if the franchisor is a
limited liability company.
(2) Any entity with total assets exceeding five million dollars
($5,000,000) according to its most recent financial statements and
not specifically formed for the purpose of acquiring the franchise
offered. For purposes of this section, "entity" shall mean an
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, limited
liability company, or partnership. The financial statements referred
to in this paragraph shall meet both of the following requirements:
(A) Be as of date not more than 90 days prior to the earlier of
either the date on which the first prospective purchaser signs any
binding franchise or other agreement with the franchisor in
connection with the award of the franchise, or the date on which the
franchisor receives any consideration from the first prospective
purchaser in connection with the award of the franchise.
(B) Be prepared in accordance with either of the following:
(i) Generally accepted accounting principles and, if the entity
has consolidated subsidiaries, on a consolidated basis.
(ii) The rules and requirements of the Securities and Exchange
Commission, whether or not required by law to be prepared in
accordance with those rules and requirements.
(3) Any natural person whose net worth, or joint net worth with
that person's spouse, exceeds one million dollars ($1,000,000) at the
time of his or her purchase of the franchise, excluding the value of
that person's personal residence, any and all retirement or pension
plan accounts or benefits, home furnishings, and automobiles.
(4) Any natural person whose gross income exceeds three hundred
thousand dollars ($300,000) per year in each of the two most recent
years, or whose joint gross income with that person's spouse exceeds
five hundred thousand dollars ($500,000) per year in each of those
years, and who reasonably expects to reach the same income level in
the current year.
(5) Any entity, in which all of the equity owners are persons or
entities described in either paragraph (1), (2), (3), or (4).
(b) Each and every purchaser of the franchise has knowledge and
experience in financial and business matters, either alone or with
professional advisers of the purchaser who are unaffiliated with, and
not directly or indirectly compensated by, the franchisor or an
affiliate or selling agent of the franchisor, such that the
franchisor reasonably believes, based on reasonable inquiry before
the sale, that each and every purchaser has the capacity to evaluate
the merits and risks of, and protect their own interests in, the
franchise investment.
(c) Each and every purchaser of the franchise purchases the
franchise for the purchaser's own account, or a trust account if the
purchaser is a trustee, for the purpose of conducting the business as
a franchise and not with a view to, or for a sale in connection
with, any resale or distribution of the franchise or any interest in
the franchise.
(d) The immediate cash payment required from a purchaser of the
franchise who is a natural person, upon the purchase of the
franchise, shall not exceed 10 percent of that person's net worth or
joint net worth with that person's spouse, exclusive of that person's
personal residence, any and all retirement or pension accounts or
benefits, home furnishings and automobiles.
(e) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 prior to any offer or sale of a franchise in this state for
which the exemption is claimed during any calendar year in which one
or more franchises are sold, excluding any material modification.
(f) No franchisor or any of its officers, directors, employees, or
agents shall form, organize, engage, or assist any person to
purchase a franchise for resale or distribution to avoid the
registration requirements of Chapter 2 (commencing with Section
31110).
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 offering circular:
(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.
(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) 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) For purposes of this section, "material" means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.
