Interpretive Opinion No. 71 / 24F

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. Philip F Zeidman
Attorney at Law
Browmstein, Zeidman, Drew & Schomer
Suite 900
Washington, DC 20036

Dear Mr. Zeidman:

The request for an interpretive opinion contained in your letter dated March 10, 1971, has been considered by the Commissioner. We understand your letter to raise the question whether the associate director franchises of General Business Services, Inc. ("General") in addition to being registered by General under Section 31110 of the Franchise Investment Law, must also be registered by the area directors.

We understand that General has filed with this Department, two applications for registration of franchises, one to register associate director franchises, and another to register area director franchises.

We understand you to represent that area directors are assigned primary areas of responsibility and have one or more associate directors in their area. The associate directors purchase from the area directors (except for initial purchases which are made from General directly) and resell to their customers subscriptions to services provided by General, consisting of recordkeeping systems, tax return preparation services, and monthly tax bulletin and tax advisory services.

In your letter your assert that the associate director franchise offering does not involve subfranchising. Section 31009 of the Law defines "subfranchisor" to mean a person to whom an area franchise is granted, and Section 31008 defines an " area franchise'' to mean any contract or agreement between a franchisor and franchisee whereby the subfranchisor is granted the right, for consideration given in whole or in part for such right, to sell or negotiate the sale of franchises in the name of or on behalf of the franchisor.

In order to answer the question raised in your letter, as stated in the first paragraph of this opinion, it is unnecessary to determine whether the area directors are subfranchisors. In our opinion, the registration requirement of Section 31110 is satisfied when the registration of the associate director franchises upon the application filed by, General, as above stated, becomes effective.

Dated: San Francisco California
March 29, 1971

By order of
Commissioner of Corporations

Assistant Commissioner
Office of Policy