Interpretive Opinion No. 71 / 27F
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. Ronald R. Hrusoff
Attorney at Law
Sullivan, Marinos, Augustine & Delafield
111 Elm Streen
Post Office Box 362
San Diego, CA 92112
Dear Mr. Hrusoff:
The request for an interpretive opinion, contained in your letter dated April 7, 1971, has been considered by the Commissioner. Your letter raises the. question whether the offer and sale of franchises in the State of California by Burger King Corporation ( "Burger King" ) is exempt from the registration requirement of Section 31110 of the Franchise Investment Law by virtue of: Section 31101.
Section 31101 of the Law exempts from the disclosure and registration requirement of Section 31110, the offer and sale of a franchise, if the standard as to financial condition set forth in Subdivision (a) of Section 31101 and the standard as to scope of operations set forth in Subdivision (b) of the Section are met, and if the disclosures required by Subdivision (c) of that Section are made.
You have represented that Burger King is a wholly owned subsidiary of Pillsbury Company ("Pillsbury"); that both Pillsbury and Burger King have a net worth in excess of $5,000,000; and that Burger King has had more than 25 franchisees conducting business during the immediately preceding five year period. Accordingly, it is our opinion that Burger King meets the standards set forth in Subdivisions (a) and (b) of Section 31101 of the Law.
Subdivision (c) of Section 31101 calls for the disclosure of certain factual data in writing to each prospective franchisee at least 48 hours prior to the execution by these prospective franchisees of any binding franchise or other agreement, or at least 48 hours prior to the receipt of any consideration. For the detail of the information thus required to be disclosed, please be referred to items (1) through (14) of that subdivision. Since the determination as to whether the material submitted with your request is complete and accurate so as to meet the requirements of Subdivision (c) is a factual determination, it is not a proper subject for an interpretive opinion issued pursuant to Sections 31510, 31511, Corp. Code. Accordingly, we are unable to express the opinion that the offer and sale of franchises by Burger King in California is exempt from the registration requirement of Section 31110 by virtue of Section 31101.
Accompanying your request for an interpretive opinion was a letter enclosing Burger King's prospectus, franchise agreement, and factual statement to be filed as advertising material pursuant to Section 31156 of the Franchise Investment Law. That Section requires the filing of any advertising offering a franchise subject to the registration requirements of Section 31110. As indicated above, it is our opinion that Burger King meets the standards of Subdivisions (a) and (b) of Section 31101. If Burger King also meets the disclosure requirements of Subdivision (c) of that Section and is therefore exempt from the registration requirement of Section 31110, it is our opinion that Burger King is not required to file its advertising. Accordingly, we are not accepting the filing of Burger King is advertising at this time, nor are we reviewing it to determine whether it violates any section of the Franchise Investment Law, including Section 31157.
Dated: San Francisco California
May 12, 1971
By order of
ANTHONY R. PIERNO
Commissioner of Corporations
HANS A. MATTES
Office of Policy