Interpretive Opinion No. 71 / 14F
State of California Department of Corporations
Anthony R. Pierno, Commissioner
In reply refer to: File No. _____
This interpretive opinion is issued by the Commissioner of Corporations pursuant to section 31510 of the franchise investment law. It is applicable only to the transaction identified in the request therefor, and may not be relied upon in connection with any other transaction.
Mr. Walter S. Barnes
Attorney at Law
Curry & Barnes
Long Beach, CA 90808
Dear Mr. Barnes :
The request for an interpretive opinion contained in your letter dated January 28, 1971, has been considered by the Commissioner. Your letter raises the question whether the agreements between Revendus, Inc., a California corporation ("Revendus" ), and the persons referred to in your letter and hereinbelow as "dealers" constitute franchises within the definition of Section 31005 of the Franchise Investment Law., and if so, whether any exemption from the provisions of the Law is available. In our opinion the subject agreements are not franchises subject to the provisions of the Law.
You have represented that Revendus has devised a concept and system whereby it will act as tour operator in connection with the rental of camper and mobile home rental units by the dealers. Customers order such units through a participating airline. The airline collects a deposit from the customers and places it in a fiduciary account. It notifies Revendus of the order which is then assigned by Revendus(on a rotational basis) to a dealer who in turn provides the unit on a rental basis to the customer upon his arrival at his destination. At that time, the customer signs a rental contract and makes a security deposit. Upon the return of the unit, the dealer forwards to Revendus a copy of the rental contract after collecting mileage and/or other extra fees. Revendus verifies the contract figures, orders the return of the initial deposit from the airline's fiduciary, and remits the balance of funds indicated on the rental contract to the dealer, less 25% of the gross rental and mileage fee.
You have further represented that in the agreement with Revendus, dealers agree to provide rental units to customers procured through the Revendus system. However, they remain free to rent units to other persons. They may, but are not required to, use the Revendus trade name and style and may engage in other business.
Section 31110 of the Franchise Investment Law imposes a registration requirement on the offer or sale of franchises in this state on or after April 15, 1971. Section 31005 defines "franchise" to include an agreement, either oral or written, between two or more persons by which a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor, the operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trade name, and the franchisee is required to pay a franchise fee.
It does not appear that Revendus collects any franchise fee from the dealers or any of the other persons with whom it does business. Its sole revenue consists of the 25% of the rental and mileage fees paid by the customers. In our opinion, the percentage thus retained does not constitute a franchise fee paid by the dealers. It also does not definitely appear that the dealers operate their business under a marketing plan or system prescribed in substantial part by Revendus.
Accordingly, it is our opinion, that under the circumstances described in your letter, the agreements between Revendus and the dealers, are not "franchises" within the definition of Section 31005 of the Franchise Investment Law and are not subject to the provisions of that Law.
Dated: San Francisco California
March 17, 1971
By order of
ANTHONY R. PIERNO
Commissioner of Corporations
HANS A. MATTES
Office of Policy