Commissioner's Opinion No. 72 / 22F

State of California Department of Corporations

Brian R. Van Camp, Commissioner
In reply refer to: File No. _____

This letter is not an Interpretive Opinion for the reasons stated below.

Mr. Kenneth A Granberg
Attorney at Law
Law Offices of
Milo Witney Smith
44 Montgomery Street
San Francisco, CA 94104

Dear Mr. Granberg:

The request for an interpretive opinion contained in your letter dated April 28, 1972, has been considered by the Commissioner. Your letter raises the question whether, under the circumstances described therein, the franchises of Western Men, 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; some are operated by franchisees. Western on occasion sells additional franchises:

You have further represented that 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 franchisees 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 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 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
June 7, 1972

By order of
BRIAN R. VAN CAMP
Commissioner of Corporations

By __________________
HANS A. MATTES
Assistant Commissioner
Office of Policy