Interpretive Opinion No. 71 / 56F
State of California Department of Corporations
Brian R. Van Camp, 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. Jeffrey A. Norton
Attorney at Law
Norton & Norton
341 North Maple Drive
Beverly Hills, CA 90210
Dear Mr. Norton:
The request for an interpretive opinion contained in your letter dated October 13, 1971, has been considered by the Commissioner. Your letter raises the question whether under the circumstances described therein, the offer and sale of a franchise by Tiffany's Bakeries, Ltd., a Toronto corporation ( "Tiffany's"), to a Canadian citizen domiciliary would take place "in this state", so as to be subject to the registration requirement of the Franchise Investment Law. Based on the assumption stated below, this question is answered in the negative.
You have represented that Tiffany's is not doing business and is not domiciled in California. It operates one bakery and has franchised another bakery in Ontario, Canada. Additionally, through an American subsidiary, it operates a bakery in Milwaukee, Wisconsin. It proposes to sell to a Canadian citizen domiciliary who is not now doing business in California, a franchise to conduct a bakery business solely in the City of San Jose, California.
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, the franchised 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 offeror to this state and received at the place to which it is directed, 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.
You have represented that no offers or negotiations whatsoever have taken place in the State of California and that the only contact with California consists of a survey of the San Jose area by the prospective franchisee. We therefore assume, and expressly predicate our opinion on the assumption, that no offers or negotiations will hereafter take place in this state.
You have further advised us that Tiffany's has had preliminary discussions in California with prospective lessors. We presume these discussions to have been concerned with the acquisition by Tiffany's of a lease for the account of the proposed franchisee. We understand that Tiffany's will cause the lease and the sublease, presumably to the franchisee, to be executed in the name of a subsidiary corporation.
Under these circumstances, it is our opinion that the offer and sale of the franchise proposed by Tiffany's will not take place "in this state", and therefore is not subject to the registration requirement of the Franchise Investment Law.
Please understand that this letter is not applicable, and does not have the legally binding effect of an interpretive opinion with respect, to any negotiations heretofore conducted by Tiffany's. Interpretive opinions under Sections 31510 and 31511 of the Franchise Investment Law, are issued for the principal purpose of providing a procedure by which members of the public can protect themselves against liability for acts done or omitted in good faith in reliance upon an administrative determination made under the Law, and, of course, there can be no such reliance where the transaction in question has already taken place (Dept. of Corp., Release No. 2-F).
Since we have concluded that the offer and sale of the franchise in question does not take place "in this state" within the meaning of Section 31013, it is unnecessary to consider the applicability of Rule 100.1 referred to in your letter.
Dated: San Francisco, California
November 16, 1971
By order of
BRIAN R. VAN CAMP
Commissioner of Corporations
HANS A. MATTES
Office of Policy