Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a)
General. Each offering circular shall contain the information required by the
Uniform Franchise Registration Application, as defined in Section
310.111(b), and
as modified by this section.
(b)
Manner of Presenting Information. Present the information in the offering
circular in a clear, concise fashion that is readily understandable by a person
unfamiliar with the franchise business. Define the franchisee as "you" in Item
1 and use this description throughout the offering circular. In Item 1 use the
word "we," initials or one or two words to refer to the franchisor. Use
different initials or a different one or two words to refer to other persons
contracting with the franchisee under the franchise agreement. Except in the 23
Item titles, use these initials or word(s) to describe these persons or
entities throughout the offering circular.
(c) California Instructions for the UFOC.
(1) A preface, exhibit or appendix to the
UFOC must state: "THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY
OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED
TOGETHER WITH THE OFFERING CIRCULAR".
(2) "Salesman Disclosure Form" and Item 3.A
of the Body of the UFOC: In an initial application to register the offer and
sale of a franchise, do not disclose a pending action involving an arrest that
did not result in conviction or plea of nolo contendere.
(3) Item 3.C: In addition to the information
required by Item 3.C, state whether the franchisor, any person or franchise
broker in Item 2 of the UFOC is subject to any currently effective order of any
national securities association or national securities exchange, as defined in
the Securities Exchange Act of 1934,
15 U.S.C.A.
78a et seq., suspending or expelling such
persons from membership in that association or exchange. The information
required by this provision may be included in Item 3 or in a preface, exhibit
or appendix, which is part of the offering circular. If the information is in a
preface, exhibit or appendix, a reference to the preface, exhibit or appendix
shall be prominently set forth in Item 3.
(4) Item 5: If the initial fee can vary,
include a mathematical formula which enables the franchisee to calculate the
specific dollar amount of the franchise fee.
(5) Item 17: Additional Paragraph(s)
Required. The paragraph(s) required by this provision may be included in Item
17 or in a preface, exhibit or appendix, which is part of the offering
circular. If the paragraph(s) are in a preface, exhibit or appendix, a
reference to the preface, exhibit or appendix shall be prominently set forth in
Item 17.
(A) In addition to the information
required by Item 17, all offering circulars shall contain the following
paragraph: California Business and Professions Code Sections
20000
through
20043
provide rights to the franchisee concerning termination or non-renewal of a
franchise. If the franchise agreement contains a provision that is inconsistent
with the law, the law will control.
(B) If the franchise agreement contains one
or more of the provisions referred to in the following paragraph(s), the
appropriate paragraph(s) shall be included:
i. The franchise agreement provides for
termination upon bankruptcy. This provision may not be enforceable under
federal bankruptcy law (11
U.S.C.A. Sec. 101 et seq.).
ii. The franchise agreement contains a
covenant not to compete which extends beyond the termination of the franchise.
This provision may not be enforceable under California law.
iii. The franchise agreement contains a
liquidated damages clause. Under California Civil Code Section
1671, certain
liquidated damages clauses are unenforceable.
iv. The franchise agreement requires binding
arbitration. The arbitration will occur at (indicate sites) with the costs
being borne by (explanation). Prospective franchisees are encouraged to consult
private legal counsel to determine the applicability of California and federal
laws (such as Business and Professions Code Section
20040.5,
Code of Civil Procedure Section
1281,
and the Federal Arbitration Act) to any provisions of a franchise agreement
restricting venue to a forum outside the State of California.
v. The franchise agreement requires
application of the laws of (indicate jurisdiction). This provision may not be
enforceable under California law.
(6) Item 19: If any earnings claim is made,
and the earnings claim figure(s) does (do) not include either costs of sales or
operating expenses, then, in addition to the information required by Item 19,
all offering circulars shall contain the following statement prominently set
forth in Item 19 or set forth in a preface, exhibit or appendix, which is part
of the offering circular. If the statement is set forth in a preface, exhibit
or appendix, a reference to the preface, exhibit or appendix shall be
prominently set forth in Item 19: "The earnings claims figure(s) does (do) not
reflect the costs of sales, operating expenses, or other costs or expenses that
must be deducted from the gross revenue or gross sales figures to obtain your
net income or profit. You should conduct an independent investigation of the
costs and expenses you will incur in operating your (franchised business).
Franchisees or former franchisees, listed in the offering circular, may be one
source of this information."
1. Repealer
and new section filed 11-21-79; designated effective 1-1-80 (Register 79, No.
46). For prior history, see Registers 74, No. 52 and 74, No. 42.
2.
Amendment of subsections (a) and (c) filed 7-17-81; effective thirtieth day
thereafter (Register 81, No. 29).
3. Amendment filed 7-27-88;
operative 8-26-88 (Register 88, No. 32).
4. Amendment filed 1-20-94;
operative 2-21-94 (Register 94, No. 3).
5. Amendment of subsection
(a) filed 4-6-94; operative 5-6-94 (Register 94, No. 14).
6.
Amendment filed 6-10-2003; operative 7-10-2003 (Register 2003, No.
24).
Note: Authority cited: Section
31502,
Corporations Code. Reference: Sections
31110,
31111,
31114,
31119
and
31125,
Corporations Code.
