DIVISION 5. FRANCHISE INVESTMENT LAW [31000. - 31528.]
Division 5 added by Stats. 1970, Ch. 1400.
§§ 31000–31528 · 118 sections
PART 1. DEFINITIONS §§ 31000–31020 · 25 sections
- § 31000 This division may be known as the “Franchise Investment Law.” References in this division to “this law” refer to the applicable provisions of this division.
- § 31001 The Legislature hereby finds and declares that the widespread sale of franchises is a relatively new form of business which has created numerous problems both…
- § 31001.1 (a) To enhance the uniform and efficient administration, and the effective enforcement, of this division, it is the intent of the Legislature that the…
- § 31002 Unless the context otherwise requires, the definitions in this part apply throughout this division.
- § 31003 “Advertisement” means any written or printed communication or any communication by means of recorded telephone messages or spoken on radio, television, or…
- § 31003.5 “Business days” are all days other than every Saturday, every Sunday, and such other days as are specified or provided for as holidays in the Government Code.
- § 31004 “Commissioner” means the Commissioner of Financial Protection and Innovation.
- § 31005 (a) “Franchise” means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which: (1) A franchisee is…
- § 31005.5 For the purposes of this division and in respect only to a franchise as defined in subdivision (b) of Section 31005, the following terms shall have the…
- § 31006 A “franchisee” is a person to whom a franchise is granted.
- § 31007 A “franchisor” is a person who grants a franchise.
- § 31008 “Area franchise” means any franchise between a franchisor and a franchisee whereby the franchisee is granted the right to operate more than one unit within a…
- § 31008.5 “Subfranchise” means any contract or agreement between a franchisor and a subfranchisor whereby the subfranchisor is granted the right, for consideration given…
- § 31009 A “subfranchisor” is a person to whom a subfranchise is granted.
- § 31010 Where used in this law, unless specifically stated otherwise, “franchise” includes “area franchise” and “subfranchise.”
- § 31011 “Franchise fee” means any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a…
- § 31012 “Fraud” and “deceit” are not limited to common law fraud or deceit.
- § 31013 (a) An offer or sale of a franchise is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or if the…
- § 31014 “Order” means a consent, authorization, approval, prohibition or requirement applicable to a specific case issued by the commissioner.
- § 31015 “Person” means an individual, a corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust or an…
- § 31016 “Publish” means publicly to issue or circulate by newspaper, mail, radio or television, or otherwise to disseminate to the public.
- § 31017 “Rule” means any published regulation or standard of general application issued by the commissioner.
- § 31018 (a) “Sale” or “sell” includes every contract or agreement of sale of, a contract to sell, or disposition of, a franchise or interest in a franchise for value.…
- § 31019 “State” means any state, territory, or possession of the United States, the District of Columbia and Puerto Rico.
- § 31020 (a) “Franchise broker” means a person who directly or indirectly engages in the business of the offer or sale of a franchise, regardless of the title used by…
PART 2. REGULATION OF THE SALE OF FRANCHISES §§ 31100–31158 · 37 sections
CHAPTER 1. Exemptions §§ 31100–31109.1 · 11 sections
- § 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…
- § 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…
- § 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…
- § 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…
- § 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)…
- § 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…
- § 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…
- § 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…
- § 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…
- § 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…
- § 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,…
CHAPTER 2. Disclosure §§ 31110–31126 · 17 sections
- § 31110 On and after April 15, 1971, it shall be unlawful for any person to offer or sell any franchise in this state unless the offer of the franchise has been…
- § 31111 (a) The application for registration of an offer shall be filed with the commissioner upon the Uniform Franchise Registration Application, as identified,…
- § 31112 Any application or amendment under this law shall be signed and verified by the franchisor or by the subfranchisor. Such verification shall be in the same…
- § 31113 If the commissioner finds that it is necessary and appropriate for the protection of prospective franchisees or subfranchisors because the applicant has failed…
- § 31114 The application for registration shall be accompanied by a proposed franchise disclosure document, which shall contain the material information set forth in…
- § 31115 The commissioner may summarily issue a stop order denying the effectiveness of or suspending or revoking effectiveness of any registration if the commissioner…
- § 31116 (a) Except as provided in subdivision (b), if no stop order under Section 31115 is in effect under this law, registration of the offer of franchises…
- § 31117 Upon the entry of a stop order under Section 31115 the commissioner shall promptly notify the applicant that it has been entered and of the reasons therefor…
- § 31118 The commissioner may vacate or modify a stop order if he or she finds that the conditions which caused its entry have changed or that it is otherwise in the…
- § 31119 (a) It is unlawful to sell any franchise in this state that is subject to registration under this law without first providing to the prospective franchisee, at…
- § 31120 A franchise offering shall be deemed duly registered for a period of one year from the effective date of the registration, unless the commissioner by order or…
- § 31121 (a) The registration may be renewed for additional periods of one year each, unless the commissioner by rule or order specifies a different period, by…
- § 31122 The registration renewal statement shall be in the form and content prescribed by the commissioner, and shall be accompanied by a proposed offering prospectus.…
- § 31123 A franchisor shall promptly notify the commissioner in writing, by an application to amend the registration, of any material change in the information…
- § 31124 An amendment to an application filed after the effective date of the registration of the sale of franchises, if such amendment is approved by the commissioner,…
- § 31125 (a) An application for registration of a material modification of an existing franchise or of existing franchises shall be in a form and contain information as…
- § 31126 (a) A prospective franchisee seeking to buy an existing franchise, all or substantially all of the assets of an existing franchise business, or an interest in…
CHAPTER 3. General Provisions §§ 31150–31158 · 9 sections
- § 31150 Every franchisor or subfranchisor offering franchises for sale in this state shall at all times keep and maintain a complete set of books, records, and…
- § 31151 The commissioner may accept and act upon the opinions, appraisements and reports of any engineers, appraisers, or other experts which may be presented by an…
- § 31152 Any document filed under this law or under the Corporate Securities Law of 1968 or a predecessor statute thereto may be incorporated by reference in a…
- § 31153 In any proceeding under this law, the burden of proving an exemption or an exception from a definition is upon the person claiming it.
- § 31154 (a) Neither (1) the fact that an application for registration under this law has been filed, nor (2) the fact that such registration has become effective…
- § 31155 Every applicant for registration of an offer to sell franchises under this law, by other than a California corporation, California limited partnership, or…
- § 31156 No person shall publish in this state any advertisement offering a franchise subject to the registration requirements of this law unless a true copy of the…
- § 31157 No person shall publish any advertisement concerning any franchise in this state after the commissioner finds that the advertisement contains any statement…
- § 31158 (a) Notwithstanding any other law, the commissioner may by rule or order prescribe circumstances under which to accept electronic records or electronic…
PART 3. FRAUDULENT AND PROHIBITED PRACTICES §§ 31200–31221 · 10 sections
CHAPTER 1. Fraudulent Practices §§ 31200–31204 · 5 sections
- § 31200 It is unlawful for any person willfully to make any untrue statement of a material fact in any application, notice or report filed with the commissioner under…
- § 31201 It is unlawful for any person to offer or sell a franchise in this state by means of any written or oral communication not enumerated in Section 31200 which…
- § 31202 It is unlawful for any person willfully to make any untrue statement of a material fact in any statement required to be disclosed in writing pursuant to…
- § 31203 It is unlawful for any person to violate any order of the commissioner or condition to the effectiveness of the registration of the offer or sale of franchises.
- § 31204 (a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible…
CHAPTER 2. Prohibited Practices §§ 31210–31212 · 3 sections
- § 31210 It is unlawful for any person to effect or attempt to effect a sale of a franchise in this state, except in transactions exempted under Chapter 1 (commencing…
- § 31211 If in the opinion of the commissioner any person is acting in violation of Section 31210, the commissioner may order such person to desist and refrain from…
- § 31212 No franchisor shall refuse to grant a franchise, or refuse to provide financial assistance, to a franchisee or prospective franchisee that has been granted or…
CHAPTER 3. Unfair Practices §§ 31220–31221 · 2 sections
- § 31220 It shall be a violation of this division for any franchisor, directly or indirectly, through any officer, agent or employee, to restrict or inhibit the right…
- § 31221 It shall be a violation of this division for any franchisor, directly or indirectly, through any officer, agent, or employee, to violate the provisions of…
PART 4. ENFORCEMENT §§ 31300–31420 · 22 sections
CHAPTER 1. Civil Liability §§ 31300–31306 · 8 sections
- § 31300 (a) Any person who offers or sells a franchise in violation of Section 31101, 31110, 31119, 31200, or 31202, or in violation of any provision of this division…
- § 31301 Any person who violates Section 31201 shall be liable to any person (not knowing or having cause to believe that such statement was false or misleading) who,…
- § 31302 Every person who directly or indirectly controls a person liable under Section 31300 or 31301, every partner in a firm so liable, every principal executive…
- § 31302.5 (a) Any person who violates Section 31220 may be sued in the superior court in the county in which the defendant resides or where a franchise affected by the…
- § 31303 No action shall be maintained to enforce any liability created under Section 31300 unless brought before the expiration of four years after the act or…
- § 31304 No action shall be maintained to enforce any liability created under Section 31301 unless brought before the expiration of two years after the violation upon…
- § 31305 Every cause of action under this chapter survives the death of any person who might have been a plaintiff or defendant.
- § 31306 Nothing in this chapter shall limit any liability which may exist by virtue of any other statute or under common law if this law were not in effect.
CHAPTER 2. Powers of the Commissioner §§ 31400–31408 · 10 sections
- § 31400 (a) Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision…
- § 31400.1 In any proceeding under Section 31400, the court may prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall…
- § 31401 (a) The commissioner may in his discretion (1) make such public or private investigations within or outside of this state as he deems necessary to determine…
- § 31402 If, in the opinion of the commissioner, the offer of any franchise is subject to registration under this law and it is being, or it has been, offered for sale…
- § 31403 If, in the opinion of the commissioner, the offer of any franchise exempt from registration under this law is being or has been offered for sale without…
- § 31404 The commissioner may refer evidence that is available concerning any violation of this law or of any rule or order hereunder to the district attorney of the…
- § 31405 (a) Any person who violates any provision of this law, or who violates any rule or order made under this law, shall be liable for a civil penalty not to exceed…
- § 31406 (a) If, upon inspection or investigation, based upon a complaint or otherwise, the commissioner has cause to believe that a person is violating or has violated…
- § 31407 (a) If, after examination or investigation, the commissioner has reasonable grounds to believe that any person is conducting or has conducted business in…
- § 31408 (a) If the commissioner determines it is in the public interest, the commissioner may include in any administrative action brought under this division,…
CHAPTER 3. Crimes §§ 31410–31412 · 3 sections
- § 31410 Any person who willfully violates any provision of this law, or who willfully violates any rule or order under this law, shall upon conviction be fined not…
- § 31411 Any person who willfully employs, directly or indirectly, any device, scheme, or artifice to defraud in connection with the offer or sale of any franchise or…
- § 31412 Nothing in this law limits the power of the state to punish any person for any conduct which constitutes a crime under any other statute.
CHAPTER 4. Service of Process § 31420 · 1 section
- § 31420 When any person, including any nonresident of this state, engages in conduct prohibited or made actionable by this law or any rule or order hereunder, whether…
PART 5. ADMINISTRATION §§ 31500–31506 · 7 sections
- § 31500 (a) The commissioner shall charge and collect the fees fixed by this section. All fees and charges collected under this section shall be transmitted to the…
- § 31501 Every final order, decision, license, or other official act of the commissioner is subject to judicial review in accordance with law.
- § 31502 The commissioner may from time to time make, amend and rescind such rules, forms, and orders as are necessary to carry out the provisions of this law,…
- § 31503 All rules of the commissioner, other than those relating solely to the internal administration of the Department of Financial Protection and Innovation, shall…
- § 31504 (a) All applications, reports and other papers and documents filed with the commissioner under this law shall be open to public inspection, except that the…
- § 31505 Upon request and at such reasonable charges as he prescribes by rule, the commissioner shall furnish to any person photostatic or other copies (certified under…
- § 31506 (a) The commissioner may destroy any applications or orders, together with the files and folders, as useless or obsolete, four years after the date of filing…
PART 6. GENERAL PROVISIONS §§ 31510–31516 · 8 sections
- § 31510 The commissioner in his discretion may honor requests from interested persons for interpretive opinions.
- § 31511 No provision of this law imposing any liability applies to any act done or omitted in good faith in conformity with any rule, form, order, or any written…
- § 31512 Any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this law or any rule or…
- § 31512.1 Any provision of a franchise agreement, franchise disclosure document, acknowledgment, questionnaire, or other writing, including any exhibit thereto,…
- § 31513 Whenever a person is entitled under this law to a hearing in accordance with the provisions of Chapter 5 (commencing with Section 11500) of Part 1 of Division…
- § 31514 If any provision of this law or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or…
- § 31515 Prior law exclusively governs all suits, actions, prosecutions or proceedings which are pending or may be initiated on the basis of facts or circumstances…
- § 31516 Nothing in this law is intended to preclude the applicability of the Real Estate Law, Part 1 (commencing with Section 10000), Division 4 of the Business and…
PART 7. FRANCHISE BROKERS §§ 31520–31528 · 9 sections
- § 31520 (a) A franchise broker shall register by filing online all of the following with the commissioner: (1) A completed Uniform Franchise Broker Disclosure…
- § 31521 (a) A registered franchise broker shall promptly notify the commissioner in writing by an application to amend the registration of any material change in the…
- § 31522 (a) The commissioner may summarily issue a stop order suspending or revoking any registration under this part if the commissioner finds that the franchise…
- § 31523 A registered franchise broker offering a franchise for sale in this state shall keep and maintain a complete set of books, records, and accounts of that offer…
- § 31524 A registered franchise broker is subject to, and shall comply with, all of the following: (a) Section 31154. (b) Section 31155. (c) Section 31156. (d) Section…
- § 31525 (a) It is unlawful for a franchise broker to offer or sell a franchise in this state unless the franchise broker is registered pursuant to this part. (b) For…
- § 31526 (a) It is unlawful for a franchise broker to communicate with a prospective franchisee about investing in a franchise opportunity that is subject to…
- § 31527 For purposes of this part, the Uniform Franchise Broker Disclosure Document shall contain all of the following information: (a) A franchise broker cover page,…
- § 31528 The implementation of this part is contingent upon an appropriation for its purposes by the Legislature in the annual Budget Act or other statute. This part…