Interpretive Opinion No. 71 / 5F
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. Kenneth A. Granberg
Attorney at Law
Law Offices of Milo Whitney Smith
44 Montgomery Street
San Francisco, CA, 94104
Dear Mr. Granberg:
The request for an interpretive opinion contained in your letter dated February 3, l97l, has been considered by the Commissioner. Your letter raises the question, whether under the circumstances described therein, the franchises of Western Girl, Inc., a California corporation ("Western"), are offered or sold "in this state" so as to subject such offer and sale to the registration requirement of the Franchise Investment Law. It is our opinion that this question must be answered in the negative.
You have represented that Western operates temporary help service offices and is presently doing business in forty-two states and seven foreign countries. Most of the offices are owned by Western Girl; some are operated by franchisees. Western on occasion sells additional franchises.
You have further represented t:hat the home office of Western is in San Francisco, California, but all advertising and solicitation for offers to buy franchises and all other offers to sell franchises originate from the regional managers who are employees of Western and who represent Western in various parts of the United States. None of these regional managers are located in California and none of the prospective franchisees or franchise territories are located in California.
You have represented that while the regional managers use promotional material, forms of agreement and guidelines regarding franchise fees to be charged, all prepared in California, their negotiations with prospective franchises are carried on outside of this state, and they have authority to negotiate the terns of the pre-printed franchise agreement forms. Franchise agreements are subject to review by the legal department of Western in the San Francisco home office, but that department has no power to change the agreements and can only advise regional managers who have authority to accept and sign the franchise agreements on behalf of Western. The regional managers collect the franchise fee, we understand outside of California and deposit it to the account of Western.
The Franchise Investment Law imposes registration and other requirements on the offer or sale of franchises "in the state". Section 31013 of the Law defines the circumstances under which 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 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 offeror to this state, and an offer to sell is accepted in this state when acceptance is communicated to the offeror in this state.
It is our opinion that, under the circumstances described in your letter and assumed by us as outlined above, the, offer and sale of franchises by Western does not take place "in this state" Accordingly such offer and sale is not subject to the registration requirement of the Franchise Investment: Law.
Dated: San Francisco, California
March 2, 1971
By order of ANTHONY R. PIERNO
Commissioner of Corporations
HANS A. MATTES
Office of Policy