Interpretive Opinion No. 71 / 39F
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. Stuart C. Wallace
Attorney at Law
Berg & Wallace
29 South La Salle Street
Chicago, IL 60603
Dear Mr. Wallace:
The request for an interpretive opinion contained in your letter dated May 10, 1971, as supplemented by your letter dated May 21, 1971, has been considered by the Commissioner. Your letters raise the question whether, under the circumstances described therein, the franchise to be offered and sold by Homewood Industries Inc. of Homewood, Illinois ( "Homewood" ), to Mr. Gene Carpenter will be offered or sold "in this state" , so as to subject the offer and sale of the franchise to the registration requirement of the Franchise Investment Law. This question is answered in the negative.
You have represented that Mr. Carpenter is domiciled and resides, and is an operating franchisee of Homewood, in Phoenix, Arizona. Homewood is presently engaged in negotiations with Mr. Carpenter for the sale of an additional franchise under which Mr. Carpenter will operate a business in San Diego, California. If the sale is completed, it is anticipated that Mr. Carpenter will spend a portion of his time in California supervising the operation of the franchised business.
The Franchise Investment Law imposes registration and other requirements on the offer or sale of franchises "in this state" Section 31013 of the Law defines the circumstances under which an offer or sale of a franchise is deemed made "in this state". Subsection (a) provides that an offer or sale is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or if the franchisee is domiciled in this state and the franchise business is or will be operated in this state. Subsection (b) provides that an offer to sell is made in this state when the offer either originates from this state or is directed by the offer or to this state, and an offer to sell is accepted in this state when acceptance is communicated to the offeror in this state. No provision is made that the offer or sale of a franchise is to be deemed made "in this state" solely by reason of the fact that the franchised business will be operated in this state, or that the franchisee who was not physically present in this state at the time of the offer or sale of the franchise, subsequently-comes into this state for the purpose of supervising the operation of the franchised business or for other purposes.
It is our opinion that under the circumstances described in your letter and assumed by us as outlined above, the offer and sale of the franchise by Homewood to Mr. Carpenter will not take place "in this state." Accordingly, such offer and sale is not subject to the registration requirement of the Franchise Investment Law.
Since we have concluded that the proposed offer and sale of the San Diego franchise by Homewood to Mr. Carpenter will not take place "in this state" within the meaning of Section 25013, it is unnecessary to consider the applicability of Rule 100.1 referred to in your letters.
Dated: San Francisco California
June 24, 1971
By order of
ANTHONY R. PIERNO
Commissioner of Corporations
HANS A. MATTES
Office of Policy