AB 2637: 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.