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California Franchise Law Regarding Registration Requirement

Whether you are starting out in a business venture or trying to expand into California, franchising is a great way to enter and make your mark in the market. However, you may find yourself at odds, not knowing the next step after getting into an agreement with the franchise owner. Sure, you may have their blessing, but do you have the government’s approval, too? Here is a short intro to the things you need so to start your franchising business.

What is a Franchise?

A franchise is a way for businesses to expand into markets outside of their local environment. For example, if you are a business owner in Chicago trying to sell your products to the people of California, you may find it better to find someone who can carry your company’s name, brand, and reputation, to make their own version of your business in California.

In a franchise, the franchise owner gains a boost in publicity for their brand, easier accessibility outside of their local markets, and extra income in terms of licensing and other monetary agreements. Meanwhile, the franchise lessee enjoys the benefits of operating a well-known brand, removing the burden of marketing off their backs. Oftentimes, it can be a mutually beneficial relationship for both parties.

The Registration Requirements

To register for a franchise in California, you should go to the state’s Department of Financial Protection & Innovation and file for an application for registration with the following documents:

  • A filing fee of $675 to be paid to the DFPI
  • A cover letter stating the applicant’s name, Org-Id number, and the franchise owner’s fiscal year-end date
  • A Consent to Service of Process for those who are not from California
  • An Application Facing Page
  • A notarized and signed Signature Verification Page and Corporate Acknowledgment
  • A Customer Authorization of Disclosure of Financial Records
  • A Supplemental Information Page
  • Any Forms for the Sales Agent Disclosure
  • Franchise Disclosure Document, which needs to be in English
  • California State addendum
  • Audited Financial statements, which needs to be per Generally Accepted Accounting Principles (GAAP)
  • Internet Ad Exemption Notice
  • Guarantee of Performance (or any other approved Financial Assurances)

You can send your application to any of the department’s main offices in Los Angeles, San Francisco, and Sacramento. You can also have it submitted online through their website.

Exemptions

Some owners and businesses are exempted from having to apply. This includes parent companies with a large net worth. A franchise owner with a minimum of either $5 million or one with at least $1 million, but backed up by a parent company worth at least $5 million, will be considered as big enough to no longer need to apply. Another is when the franchise owner already has at least 25 franchisees.

Are You Trying to Create a Franchise in California?

The law can be confusing for most laypeople, especially if you are trying to open a franchise. It can easily seem as though it has all these twists and turns that ensure the fairness and justness of the process for everyone. If you ever need any help with commercial law, we at SAC LLP can help you with it. To learn more, please contact us today at (408) 716-1790 to schedule an appointment.

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