1971 Franchise Opinions

The Business Law Section is compiling the complete Interpretive Opinions concerning franchise issues from the State of California Department of Corporations.

Here is the archive as for 1971.

  • Opinion No. 71 / 1F - January 25, 1971

    Summary: Persons who are not licensed Real Estate Brokers or Salesman, or licensed by the Commissioner of Corporations as a broker-dealer or agent pursuant to the Corporate Securities Law, cannot sell franchises in California unless the sale of franchise is exempted under the CFIL, or the person selling the franchise is identified in an application or amended application filed with the Department.

    Key Words: 31210, 31110, Rule 210, Rule 111.1, selling franchise, sales, exempt, qualification, salesperson

  • Opinion No. 71 / 2F - February 17, 1971

    Summary: Schwinn bicycle manufacturer’s distributor agreement was determined not to be a franchise because there was no franchise fee.   Commissioner determined that even though a premium price was paid for the Schwinn bicycles that exceeded the bona fide wholesale price of nontrademarked goods of equal quality, as long as the mark-up did not exceed the actual added value the Schwinn marks provided, it was not a hidden fee.  However, if the mark-up ever exceeded the value of the marks, it could constitute a franchise fee within the meaning of Section 25011.  

    Key Words: franchise fee, hidden fee, 25011, Rule 310.011, bona fide wholesale price, distributor

  • Opinion No. 71/ 3F - February 26, 1971

    Summary: Commissioner provided opinion affirming that McDonald's is exempt from registration under Section 31101.

    Key Words: 31101, net worth, exempt, registration

  • Opinion No. 71 / 4F - March 2, 1971

    Summary: Commissioner provided opinion affirming that Arnold Palmer Enterprises is exempt from registration under Section 31101.

    Key Words: 31101, net worth, exempt, registration

  • Opinion No. 71 / 5F - March 2, 1971

    Summary:
    Where business was located in San Francisco, but sold all of its franchises outside of California, and all transactions occurred locally outside of California, it was not required to register in California because the offer and sale did not satisfy the “in this state” requirement of section 31013.

    Key Words: 31013, offer, sale, in this state, registration

  • Opinion No. 71 / 6F - March 3, 1971

    Summary: Manufacturer that also operated retail stores, sought opinion as to whether it could license a manager to operate a new store using the brand's marks. Commissioner determined that the arrangement would not a franchise because there was no franchise fee and the goods sold would be purchased at a bone fide wholesale price.  

    Key Words: franchise fee, hidden fee, 31011, 31005, 31011 Rule 011, bona fide wholesale price

  • Opinion No. 71 / 7F - March 10, 1971

    Summary: Manufacturer of costume jewelry's distributor agreement was not a franchise agreement because there was no franchise fee because all merchandise was sold to distributors at a bona fide wholesale price. 

    Key Words:
    franchise fee, hidden fee, 31011, 31005, 31011 Rule 011, bona fide wholesale price

  • Opinion No. 71 / 8F - March 10, 1971

    Summary: Despite calling its agreement a “free franchise,” manufacturer's distributor agreement was not a franchise agreement because there was no franchise fee and all merchandise was sold to distributors at a bona fide wholesale price. 

    Key Words: franchise fee, hidden fee, 31011, 31005, 31011 Rule 011, bona fide wholesale price

  • Opinion No. 71 / 9F - March 10, 1971

    Summary: McDonald's was not exempt from the registration requirement of Section 31110 where it received refundable deposits, sometimes up to a year in advance, if it did not provide written disclosures at least 48 hours prior to receiving the deposits.  Refundable deposits are deemed consideration which triggers the obligation to provide written disclosures under Section 31101.   If no deposit is received, the disclosure requirement would be triggered only if the parties entered into a binding agreement.

    Key Words: 31110, 31101, 31300, 31301 disclosure, earnings statements, earnings claims, earrings projections, exempt, deposit, refundable deposit, binding agreement

  • Opinion No. 71 / 10F - March 10, 1971

    Summary: Car rental franchise that was based in California would not be required to register in California if it sold franchises only outside of California and published only in out of state newspapers. In addition, even though the franchisor contemplated franchisees paying royalties directly to its offices in California, this would not trigger the “in this state” requirement, since payments occurring after the sale do not affect the location of the sale. Commissioner, however, determined that the "in this state" language would be triggered if the franchise transaction was initiated by a telephone call to or from the California offices, or if the franchisor advertised in magazines placed in aircraft with California points of origin or destinations.  

    Key Words: 31005, 31110, 31013, exempt, offer of sale, in this state, timing

  • Opinion No. 71 / 11F - March 10, 1971

    Summary: A statement of estimated or projected franchisee earnings is not required, but if given must be set forth in Item 19.

    Key Words: 31101, 31110, subfranchisor, exempt franchisor, earnings claim

  • Opinion No. 71 / 12F - March 10, 1971

    Summary: If exclusive representative of franchisor pays a fee to franchisor for right to sell franchises, it will be both an "area franchisee" as to franchisor and a "subfranchisor" as to unit franchisees; both area franchise and subfranchises can be covered by a single registration.

    Key Words: 31008, 31009, combined registration, area franchise, subfranchisor, offer, sale

  • Opinion No. 71 / 13F - March 12, 1971

    Summary: Non-profit co-op licensed manufacturers to produce products identified by co-op's trademarks under a license agreement. Those products were resold by co-op members under a distributor and membership agreement.  Both agreements contained 2 elements of the definition of a franchise: franchise fees and the licensing of trademarks as defined under Section 31005.  However neither the license agreement nor the distributor and membership agreement contained the 3rd element, a "marketing plan or system." The license agreement provided that products comply with quality standards only.  The distributor and membership agreement allowed the members to distribute the co-op's and other products under their own respective marketing plans or systems so this relationship did not constitute a franchise. 

    Key Words: 31005, marketing plan, co-op, license, trademark

  • Opinion No. 71 / 14F - March 17, 1971

    Summary: A tour operator rented campers and mobile homes through dealers and sought an opinion that the relationship between the operator and the dealers was not a franchise. Commissioner determined that no fees were paid to trademark owner.  Under the agreement between operator and dealers,  operator arranged for customers to rent campers and mobile homes from individual dealers. When customers pay for rentals, booking operator retained 25% and remitted the balance to individual dealers.

    Key Words: 31005, retention of money, franchise fee,  trademark, commission, dealer

  • Opinion No. 71 /15F - March 18, 1971

    Summary: Commissioner determined that seller of travel aid handi-paks through master distributors who appointed subdistributors was not a franchise.  Distributors purchased products at bona fide wholesale price and resold to retailers, with no other fees (in excess of $100 per year) paid so no franchise fee existed. 

    Key Words: 31005, 31110, Reg. §310.011, bona fide wholesale price, nominal fee, exception, $100, distributor

  • Opinion No. 71 / 16F - March 18, 1971

    Summary: Under a distribution agreement local operators were absolutely prohibited from using or being associated in any way with any trademarks owned by licensor.  Commissioner determined since no trademark license existed, then no franchise existed.

    Key Words: 31005, trademark, associated

  • Opinion No. 71 / 17F - March 18, 1971

    Summary: Commissioner determined that when licensor of the right to operate a retail store at a specific location to concessionaires using licensor's mark and selling licensor's products was not a franchise because no franchise fee was present. Concessionaires deposited gross receipts in a bank account for licensor and paid licensor the exact amount of rent paid by licensor to the primary lessors.   Commissioner based its conclusion on the assumption that no other fees were paid by concessionaires and all goods were purchased by concessionaires at bona fide wholesale prices.  

    Key Words: 31005, 31011, Reg §310.011, nominal franchise fee, distributor, commission, bona fide wholesale price

  • Opinion No. 71/18F - March 26, 1971

    Summary: Manufacturer sold portable signs through distributors under a written contract. Commissioner considered whether trademark license was present and franchise fee was paid.  Commissioner concluded that trademark license existed because even though distributors were not required to use manufacturer's trademarks, distributors were allowed to do so.  Commissioner determined however that relationship was not a franchise because the portable signs were sold at bona fide wholesale prices so no franchise fee existed.

    Key Words: 31005, 31011, Reg §310.011, nominal franchise fee, $100, bona fide wholesale price

  • Opinion No. 71/19F - Not Currently Available"

  • Opinion No. 71/20F - March 25, 1971

    Summary: Where wholesalers pay for right to purchase educational materials for resale (at bona fide wholesale prices), but no marketing plan was provided by manufacturer or acquiesced to impliedly or by practice, arrangement was not a franchise.

    Key Words: 31005, marketing plan, bona fide wholesale price, fee

  • Opinion No. 71/21F - March 26, 1971

    Summary: Where manufacturer of hair-care products authorized dealers to solicit stylists to sell manufacturer's products, with dealers receiving a portion of franchise fee paid by stylists, arrangement with stylists was a franchise.  Dealers were not area franchisees because they did not pay for right to make sales. Commissioner also considered whether dealers were either subfranchisors granting area franchises and concluded that dealers gave no consideration for the right to solicit stylists  However because dealers retained a stipulated commission for selling on behalf of manufacturer dealers needed to be either registered as broker-dealers or identified in an application filed by manufacturer.

    Key Words: 31005, 31009, 31110, 31210, franchisee, subfranchisor, license, dealer, fee, commission, area franchisee, selling agents, registration, qualification

  • Opinion No. 71/22F - March 29, 1971

    Summary: Dealers who sold beverages under manufacturer's trademark were not franchisees under Section 31005 because the only payments made to manufacturer were for purchases of goods at a bona fide wholesale price, which is not a franchise fee pursuant to Section 31011(a) and Commissioner’s Rule 011.

    Key Words: 31005, 31110, 31101(a), Rule 011, franchisee, franchise fee, bona fide wholesale price, exemption

  • Opinion No. 71/23F - March 29, 1971

    Summary: Operators who sell dry cleaning services under company’s trademark were not franchisees under Section 31005 because the only payments made to company were for purchases of equipment at bona fide wholesale prices, which is not considered a franchise fee under Section 31011(a) and Commissioner’s Rule 011.

    Key Words: 31005, 31110, Rule 011, franchise, franchise fee, bona fide wholesale price 

  • Opinion No. 71/24F - March 29, 1971

    Summary: Opinion declined to determine whether area directors who were tasked with selling services to franchisees on behalf of company were subfranchisors to whom area franchises were granted under Sections 31009 and 31008, respectively, because company had applied to register its offering of area franchises which would satisfy the registration requirement of Section 31110.

    Key Words: 31008, 31009, 31110, area franchise, subfranchisor, register

  • Opinion No. 71/25F - April 13, 1971

    Summary: Commissioner concluded that contracts between company that published and sold brochures and catalogs and merchandisers who resold the brochures and catalogs were not franchises under 31005 because no marketing plan or system was provided. Merchandisers were free to conduct their operations in any way they desired.

    Key Words: 31005, 31011, 31110, 31511, Rule 011, franchise, franchise fee, bona fide wholesale price, marketing plan or system

  • Opinion No. 71/26F - April 15, 1971

    Summary: Commissioner concluded that under Section 31102 a contract between a franchisee and a third party to sell a franchise for franchisee’s own account was exempt from the registration requirement of Section 31110 so long as the sale is not effected by or through franchisor. 

    Key Words: 31102, 31110, offer or sale of franchise for franchisee's own account, exempt

  • Opinion No. 71/27F - May 12, 1971

    Summary: Burger King had a net worth in excess of $5M, and had more than 25 franchisees conducting business during the immediately preceding five-year period. Accordingly, under Section 31101, Burger King was exempt from the registration requirement of Section 31110 but was required to make the disclosure of certain factual data to each prospective franchisee pursuant to Section 31101(c).

    Key Words: 31101, 31110, 31510, 31511, 31157, net worth, exempt, disclosure, registration

  • Opinion No. 71/28F - May 19, 1971

    Summary: Commissioner concluded that contracts between auto manufacturer and dealers were not franchises under Section 31005. Dealers were not required to pay any franchise fee to manufacturer under Section 31011 because all items were purchased by dealers at bona fide wholesale prices (pursuant to Section 31011 and Rule 011) and/or manufacturer’s cost.

    Key Words: 31005, 31011, 31110, Rule 011, franchise fee, bona fide wholesale price, auto, dealer, manufacturer, cost

  • Opinion No. 71/29F - June 1, 1971

    Summary: Commissioner considered whether the sale of copyrighted and trademarked educational training and sales programs and personal improvement programs in the form of cassette tapes, printed materials, phonograph records and films with a wholesale prices of between $300 and $400 sold through two separate operating divisions were franchises.  Distributors paid a one time fee of between $6,000 and $8,000 for the continuing right to purchase the programs at bona fide wholesale prices which included a $3,000 fee for demonstration materials and $3,000 for initial inventory. In finding no franchise existed, Commissioner relied on company’s representation that it did not prescribe any marketing plan or system for the distributors, does not impose quotas on purchases, and permits distributors to resell the program wherever, whenever, and to whomever they desired.

    Key Words: 31005, franchise, marketing plan, system, prescribed, distributor, quota

  • Opinion No. 71/30F - June 1, 1971

    Summary: Commissioner determined that contracts between company and distributors for the distribution of educational programs using copyrighted materials on cassette tapes and printed materials at wholesale prices of between $150 and $200 were not franchises under Section 31005.  Company charged a one time fee of between $4,000 and $5,000 for the continuing right to purchase the programs at bona fide wholesale prices and this included a $2,000 charge representing the retail value of the demonstration materials and $2,000 for the cost of the initial inventory at bona fide wholesale prices. In finding no franchise existed, Commissioner relied on company’s representation that it did not prescribe any marketing plan or system for the distributors, did not impose quotas on purchases, and permitted distributors to resell the program wherever, whenever, and to whomever they desired.

    Key Words: 31005, franchise, marketing plan, system, prescribed, distributor, quota

  • Opinion No. 71 / 31F - May 27, 1971

    Summary: Big Boy, a subsidiary of Marriott Corporation, sought an exemption under Section 31101 based on its net worth according to most recent unaudited financial statements of $1M and being at least 80% owned by a company with most recent audited statements of $5M. Commissioner determined that because the franchisor, Big Boy's net worth was established by unaudited financial statements the exemption from registration under Section 31101 was not available.  

    Key Words: 31101, Rule 100.1, net worth, exempt, audit, financial statement

  • Opinion No. 71 / 32F - July 12, 1971

    Summary: Licensor granted to users the exclusive right to use licensor's developments to produce all designs and products registered by users with licensor and to use licensor's apparatus within a designated territory. Users could then sell the produced products paying to licensor a percentage of the net selling price as a royalty.  Users agreed to keep books and records, names of customers and purchase dates and discounts available to licensor and to provide quarterly certified statements showing best efforts in promoting sale of devices and maintaining a high standard of quality and safety. Users were free to market products under any labels. Licensor agreed to provide consultant at $50 per day.  Commissioner considered whether the contract was a franchise and specifically whether a marketing plan or system was present.  Commissioner concluded that prescribing bookkeeping procedures, requiring use of diligence in promoting sales, and placing appropriate patents and trademarks did not constitute a marketing plan or system prescribed in substantial part by licensor. Imposition of an initial fee does not impact the decision because no marketing plan or system was prescribed by licensor.

    Key Words: 31005, marketing plan, system, initial fee

  • Opinion No. 71 / 33F - May 27, 1971

    Summary: Commissioner considered whether inventor of movable partition systems for which a patent registration was pending that licensed to licensee the exclusive rights to manufacture and sell the manufactured systems under a license agreement with a California company who would then resell components to an individual was a franchise. The contract between the California company and inventor was not provided to Commissioner. Under the contract between the California company and the individual, the individual agreed to use best efforts to promote the sales and installation of the wall systems, purchase material for and construct and maintain wall system displays which is would purchase, actively use advertising materials and at the individual's expense hold meetings with the inventor and manufacturer.  Sources for materials were recommended but not required.  The contract stated that the goods were purchased at bona fide wholesale prices. Commissioner determined that because it was represented all goods were purchased at bona fide wholesale prices and no other payments were made by the individual that the arrangement was not a franchise. 

    Key Words: 31005, 31011, license fee, bona fide wholesale price, required purchase

  • Opinion No. 71 / 34F - May 27, 1971

    Summary: Publication of an advertisement in the national edition of the Wall Street Journal and, incidentally, in the Pacific Coast edition of the Wall Street Journal did not constitute an advertisement subject to profiling with Commissioner.  The opinion noted that 2/3 of the circulation of the Wall Street Journal was outside of California.

    Key Words: 31156, 31103, Rule 013, advertising, two-thirds circulation, advertiser, pre-filing

  • Opinion No. 71 / 35F - June 21, 1971

    Summary: Commissioner determined that, subject to the accuracy of the representations of franchisor, franchisor with more than 25 franchises in operation at all times during the previous five years and a net worth in excess of $5M according to its most recent financial statements, met registration exemption requirements under Section 31101 provided that requisite disclosures were made. 

    Key Words: 31110, 31101, audited financial statements, exempt, net worth, 25 franchisees

  • Opinion No. 71 / 36F - June 21, 1971

    Summary: Commissioner determined that variance in prices paid by distributors, commissioned agents and dealers did not, as a matter of law, obviate the possibility that the prices were in fact bona fide wholesale prices.  Commissioner opined that whether they were bona fide wholesale prices was a factual determination and not subject to a legal interpretation.

    Key Words: 31005, 31101, 31110; bona fide wholesale price, exception, fee

  • Opinion No. 71 / 37F - July 23, 1971

    Summary: Commissioner determined that where membership kits were sold to account officers and accounting executives at bona fide wholesale price, and no other payment were made to franchisor, no franchise fees were paid and therefore the relationship was not a franchise.

    Key Words: 31005, 31011, Rule 011, membership organization, bona fide wholesale price, fee

  • Opinion No. 71 / 38F - June 24, 1971

    Summary: Sale of a franchise by a California based company to an individual residing in B.C. Canada would constitute the sale of a franchise since the offer would be accepted in California unless an exemption applies. Commissioner determined that under Rule 100.1 the offer or sale of a franchise to a resident of a foreign state, territory, or country who is neither domiciled in California nor actually present in the state is exempt from registration if the sale is not in violation of any law of the foreign state, territory or country concerned.  Franchisor also asked whether a disclosure that the Canadian franchisee paid a lower franchise fee must be disclosed if the sale was otherwise exempt from registration. Commissioner opined that the disclosure of the lower fee was not required as it did not relate to fees paid within the State. However, Commissioner cited Section 31201 that prohibits the offer or sale of a franchise by any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements true and not misleading. Commissioner expressly declined to assert an opinion as to whether the failure to advise the purchaser that franchisees outside of California paid a lower franchise fee constituted the omission of a material fact.   

    Key Words: Gov't Code 11422(c), Gov't Code 11422.1, 31110, 31114, 31201, Rule 100.1, sale to foreign resident, franchise fee variance disclosure, omission of materials fact

  • Opinion No. 71 / 39F - June 24, 1971

    Summary: Where negotiations and sale of a franchise to be located in California took place outside of California, and the offer and sale took place outside California, the sale was not subject to registration under the CFIL.

    Key Words: 31013, sale outside this state, registration, exempt, negotiation

  • Opinion No. 71 / 40F - June 24, 1971

    Summary: Where all offers and sales of franchises were negotiated, offered and accepted by both franchisor and franchisee outside California, registration requirements of Section 31110 were inapplicable, notwithstanding the fact that franchisor maintains its principal place of business and offices in California and its manufacturing and delivery of merchandise took place in California.

    Key Words: 31110, 31013, Gov't Code 11422(c), Gov't Code 11422.1, Rule 310.100.1, sale outside this state, registration, exempt

  • Opinion No. 71 / 41F - June 30, 1971

    Summary: Sale of educational materials to members of the real estate profession was not a franchise because the fees paid by its "associate directors," absent the bona fide wholesale price for these materials, did not exceed $100. 

    Key Words: 31005, 31011, 31510, franchise fee, bona fide wholesale price, $100, minimum fee 

  • Opinion No. 71 / 42F - July 27, 1971

    Summary: License agreements between television show producer and television stations were not franchises under Section 31005 because license agreement did not provide for a marketing plan or system prescribed in substantial part by television show producer. 

    Key Words: 31005, 31011, 31110, marketing plan or system, control, definition

  • Opinion No. 71 / 43F - August 12, 1971

    Summary: Commissioner held that franchisor was exempt from registration requirement under Section 31101 because franchisor's parent company satisfied the exemption requirements of 31101.

    Key Words: 31101, 31110, Rule 300.100, exempt, registration, parent company

  • Opinion No. 71 / 44F - August 13, 1971

    Summary: Sales of existing franchises by a real estate broker whether owned by the real estate broker or by a third party was deemed by Commissioner to be exempt under Section 31102 because the sale was for franchisee's own account and was not effected by or through franchisor.

    Key Words: 31102, 31110, 31510, exempt, registration, selling franchise, sale by franchisee, sale effected through franchisor

  • Opinion No. 71 / 45F - September 7, 1971

    Summary: Commissioner declined to express any opinion as to what the amount should be for certain goods in order to be sold at bona fide wholesale prices.  Commissioner stated that the question as to what is the bona fide wholesale price of goods is a question of fact and not a proper subject for determination in an interpretative opinion.

    Key Words: 31510, 31511, bona fide wholesale price, question of fact, registration

  • Opinion No. 71 / 46F - August 26, 1971

    Summary: Commissioner determined that agreements between home inspection company and its "regional managers" engaged in the home inspection business were not franchises because  "regional managers" were employees and/or independent contractors of home inspection company and were paid for services rendered.  

    Key Words: 31005, employee, independent contractor, payment for services rendered, exempt

  • Opinion No. 71 / 47F

    Summary: Opinion was sought as to whether amendments to existing franchise agreements regarding the extensions in the payment schedule of notes, temporary or permanent reductions in payments due and other concessions.  Commissioner stated that an amendment changing the basis on which the franchise fee would be determined would be a material change and require notification.  Commissioner stated that Commissioner deemed that changes to terms of existing franchise agreements were subject to the registration requirement of Section 31110 only if they result in either a change of the parties to the agreement or of the location at which the franchisee's business is operated.

    Key Words: 31018, 31110, 31105, 31123, Release 2-F, sales, negotiated sales, offer, amendments to franchise agreements, registration, material change, location, parties to agreement

  • Opinion No. 71 / 48F - September 1, 1971

    Summary: Relationships between bicycle manufacturer and dealers were not franchises because the only fees charged were the bona fide wholesale prices for the bikes, thus no franchise fee existed. 

    Key Words: 31005, 31011, 31110, 31510, franchise fee, bona fide wholesale price, dealer

  • Opinion No. 71 / 49F - September 8, 1971

    Summary: Commissioner determined that without any marketing plan or system imposed by the putative franchisor a franchise does not exist. 

    Key Words: 31005, 31011, marketing plan or system, franchise fee, bona fide wholesale price 

  • Opinion No. 71 / 50F - September 8, 1971

    Summary: Requirement that specific disclaimers be placed on marketing materials specific to this limited industry not sufficient for purposes of finding a marketing play or system necessary for a franchise.  

    Key Words: 31005, insurance agent, insurance broker, marketing plan or system, Insurance Code, industry, disclaimer, requirement

  • Opinion No. 71 / 51F - September 24, 1971

    Summary: Commissioner determined that payments made by distributors to the manufacturer of costume jewelry of a 1% royalty on such sales made to third parties under a written contract was a franchise fee. Manufacturer sought a second opinion as to whether it would constitute a franchise if it eliminated the 1% royalty. Commissioner then determined it would not be a franchise as long as there was no franchise fee and all costume jewelry was sold to distributors at bona fide wholesale prices.  

    Key Words: franchise fee, hidden fee, 31011, 31005, 31011 Rule 011, bona fide wholesale price, royalty

  • Opinion No. 71 / 52F - August 26, 1971

    Summary: The purchase or agreement to purchase goods at bona fide wholesale prices was not considered the payment of a franchise fee under Section 31011(a). Even though purchasers were required to make an advance deposit in an amount equal to their estimated purchases, this did not change the payment into a franchise fee because such deposit was merely a form of security reserved by the seller of goods in connection with the extension of a form of credit to distributors on an open book basis.

    Key Words: 31011, Rule 011, franchise fee, bona fide wholesale price, deposit, security, estimate

  • Opinion No. 71 / 53F - October 26, 1971

    Summary: Commissioner determined that based on the assumption that the distributors may, but are not required to purchase sales and marketing materials from manufacturer and that products are sold to the distributors at bona fide whole sale price, the agreement was not a franchise. Given that the agreement was not a franchise, no area franchise existed.

    Key Words: 21100, 31010, 31005, 31011, Rule 011, 31008, franchise fee, bona fide wholesale price, area franchise, sales, marketing, materials

  • Opinion No. 71 / 54F - October 28, 1971

    Summary: The requirement to maintain a manufacturing facility, a sales and distribution system, a warehouse, and to keep specified books of account and to make reports by a certain data did not constitute a prescribed a marketing plan or system. Commissioner determined that these requirements merely established customary verification of the royalty accounting and were for the protection of the trade secrets, know-how and potential patent rights. According to the opinion, a marketing plan or system may be prescribed if as a result of the franchisor's formal or informal suggestions or recommendations, a sales program is imposed to and results in uniformity of operation on the part of licensees so as to create the appearance of centralized management and uniform standards.

    Key Words: 31005, 31011, Rule 011, 31110, prescribed marketing plan or system, sales program, definition, trade secret , substantial

  • Opinion No. 71 / 55F - November 12, 1971

    Summary: The total amount payable by the distributors could be attributed to the purchase price of goods for less than $100 on an annual basis. Thus the arrangement was exempt from registration under Section 31011 because a deminimus fee was paid.

    Key Words: 31011, Rule 011, 31110, franchise fee, $100, minimum fee, price, purchase

  • Opinion No. 71 / 56F - November 16, 1971

    Summary: Where no negotiations took place in California and neither franchisor nor franchisee were based in California and the only contact with California consisted of a survey of the San Jose area by a prospective franchisee, an offer and sale did not take place in California and therefore was not subject to the CFIL.

    Key Words: 31013, offer and sale of the franchise, in this state, negotiations, foreign resident, exempt

  • Opinion No. 71 / 57F - November 23, 1971

    Summary: Commissioner determined that where a person only produces a product and then sells the product back to the party that contracted with them to produce the product, no franchise existed. The agreements with distributors, however, were considered to be franchises because distributors sold products on behalf of company, using their trademark and being required to comply with certain specifications maintained by company.  Distributors were also required to pay a franchise fee.

    Key Words: 31005, offering, selling, or distributing goods or services, processor, centralized management, uniform standards, distributors, produce, manufacture, distributor

  • Opinion No. 71 / 59F -- Currently not available

    Summary: Commissioner determined that a relationship in which distributor was not told how to conduct its business, was permitted to select its own business name, style or symbol, to appoint subdistributors, was provide no training, and was only provided with some promotional literature by manufacturer was not a franchise.

    Key Words: 31005, 31011, Rule 011, 31110, 31510, 31008, prescribed marketing plan or system, promotional literature, subdistributor, training, trade name

  • Opinion No. 71 / 60F - December 14, 1971

    Summary: Distributor sales that are not made pursuant to a prescribed marketing or system are not franchises. If the sales are made pursuant to a prescribed marketing plan, then it is a franchise because the payments of $200 for training school literature and material and school expenses is an initial franchise fee. The exemption does not apply because it is based on the rationale that no substantial prejudice will come to a person buying a business and paying only the bona fide wholesale price for merchandise which he proposes to sell and equipment which he will use in that business. In addition, the exception does not include payment for training, instructional literature and other school expenditures.

    Key Words: 31005, 31011, Rule 011, prescribed marketing plan or system, bona fide whole sale price, fee, minimum, training, exception

  • Opinion No. 71 / 61F - December 14, 1971

    Summary: Commissioner determined that a sales program could constitute a prescribed marketing plan or system where franchisor supplies kits or detailed instructions for presentation of the product, training material, courses or seminars. Commissioner also determined that there is no private or limited offering exemption under the CFIL.

    Key Words: 31005, prescribed marketing plan or system, sales program, private or limited offering exemption, exception

  • Opinion No. 71 / 62F - December 14, 1971

    Summary: A sales program may be prescribed by franchisor where manufacturer supplies kits or detailed instruction for presentation of the product, training material, courses or seminars. Rental payments or other compensation paid for services was considered to be an initial franchise fee, and the exception for purchase of goods at the bona fide wholesale price did not apply.

    Key Words: 31005, prescribed marketing plan or system, 31011, bona fide wholesale price, exception, training, payments

  • Opinion No. 71 / 63F - December 30, 1971

    Summary: Piano retailers were required to purchase an initial inventory, based on possible sales, and to purchase parts for warranty service from distributor, but purchases of promotional materials were optional. Commissioner determined that as  long as the initial inventory purchases were at  bona fide wholesale price, and no other payments were required, the payments were not franchise fees and therefore the relationships were not franchises.

    Key Words: 31005, 31011, Rule 011, fee, exempt, bona fide wholesale price, goods, warranty, service