Commissioner's Opinion No. 72 / 46F

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. Lawrence W. Crispo
Attorney at Law
Cummins, White & Breidenbach
1200 Hilton Center
900 Wilshire Boulevard
Los Angeles, CA 90017

Dear Mr. Crispo:

The request for a further interpretive opinion with respect to the proposed offer and sale of rent-a-car franchises by Ramada Inns, Inc. ("Ramada"), has been considered by the Commissioner. Pursuant to your letters dated September 21, 1972, and October 6, 1972, we have heretofore in Commissioner's Opinion No. 72/35F expressed the opinion that under the circumstances described in those letters and on certain assumptions made by us in our opinion, the offer and sale of such franchises is not subject to the registration requirement of Section 31110 of the Franchise Investment Law. Our opinion recited that it was predicated in part on the representation contained in your letter dated September 21, 1972, that the franchising operations of Ramada would be an incident of its motel business.

In your letter dated November 2, 1972, you have not advised that while Ramada is considering the franchising of rent-a-car operations as an incident to its motel business, it may from time to time franchise rent-a-car businesses at locations not physically adjacent to a motel and indeed in towns where there is no Ramada Inn. You have raised the question whether the sale of a rent-a-car franchise in that event is subject to the registration requirement of Section 31110, where in all other respects it is effected under the circumstances and in the manner described in your letters dated September 21, 1972 and October 6, 1972, as set forth in Commissioner's opinion no. 72/35F.

As we stated in our previous opinion, it is reasonable to assume that the Legislature with a view to its objective of avoiding the abuses described in Section 31001 of the Law, considered five years experience in the granting of any franchises as a sufficient basis for the exemption allowed in Section 31101, provided that the requirement of Subdivisions (a) and (c) of the Section are also satisfied. This conclusion leads us to express the further opinion that, if Ramada meets the requirements of Subdivisions (a) and (c) of Section 31101, its proposed offer and sale of a franchise for the operation of a rent-a-car business not adjacent to a Ramada Inn or in a town without such an Inn, will be exempt under Section 31101 from the registration requirement of Section 31110, as long as Ramada will have had at least 25 franchisees conducting motel businesses at all times during the five year period immediately preceding the proposed offer and sale of such rent-a-car franchise.

Dated: San Francisco, California
December 29, 1972

By order of
Commissioner of Corporations

By __________________
Assistant Commissioner
Office of Policy