1975 Franchise Opinions

The Business Law Section is compiling the complete Interpretive Opinions concerning franchise issues from the State of California Department of Corporations.

Here is the archive for 1975. The archive for this year is complete.

  • Opinion No. 75 / 1F - February 6, 1975

    Summary: Commissioner determined that pet identification company that distributed ear tattoo process through authorized agents was selling franchises. A marketing plan was provided by way of forms and fees, use of a numbering system, supplies, training and sales materials. Agents' businesses were substantially associated with company's symbol and since agent received only 2/3 of the fees paid by customers and did not have the use of that amount for a period of time, a franchise fee was paid by agents.

    Key Words: Section 31005, Section 31011, Rule 011, Release No. 3-F, Comm. Op. 73/15F

  • Opinion No. 75 / 2F - February 27, 1975

    Summary: Marketer and distributor of bicycles and related products entered into a partnership with partners who owned 2 retail bicycle sales stores under marketer's name and intend to develop 2 more stores. Partners will find locations, lease the properties and convert them to stores for resale. Purchaser will purchase 49% of each store in a corporation to be formed to operate each store. Corporation will purchase from partners all of the assets and liabilities of the store as a going concern including the lease and will also pay for intangible items including good will. The corporation for each store will enter into a distributor agreement with marketer to purchase bicycles and may carry other lines as well. Corporation will determine prices of bicycles and otherwise operate the stores independently although common advertising is anticipated. Corporation will employ partners as president of corporation for at least 2 years for a minimum salary of $800 per month. Commissioner concluded that the arrangements between marketer and partners and purchasers was a franchise. Partners will own 51% of each store through corporation and this control element together with common advertising and purchase requirements constituted a prescribed marketing plan. The purchase by each corporation of assets including intangible items such as good will is a franchise fee and the bona fide wholesale price exemption is not applicable.

    Key Words: Section 31005, Section 31011, Rule 011, Release No. 3-F, Comm. Op. No. 72/5F, control, prescribed marketing plan, investment in partnership as franchise fee

  • Opinion No. 75 / 3F - March 28, 1975

    Summary: L.A. provider of temporary help services through a business format franchise system that includes the use of multiple marks licensed one mark of similar franchisor that had a franchise in California purchased by L.A. provider. L.A. provider would like to sell the similar franchise to a resident of California. Commissioner held that the offer and sale by L.A. provider of the similar franchise to a third party was exempt as a sale by a franchisee for his own account even though a new franchise agreement will be signed as the new agreement is not materially different from the existing franchise agreements between L.A. provider and the similar franchisor.

    Key Words: Section 31110, Section 31102, exemption for the offer and sale of a franchise by a franchisee for his own account if the sale is not effected by or through a franchisor

  • Opinion No. 75 / 4F - May 27, 1975

    Summary: Commissioner determined that training and licensing agreement between licensor of travel tours and licensees who received training, trade secrets, agreed to buy insurance, was given an exclusive territory, paid to licensor 1% of gross receipts and was authorized to use licensor's mark was a franchise.

    Key Words: Section 31011, Release 3-F, prescribed marketing plan, franchise fee, substantial association with commercial symbol, royalty

  • Opinion No. 75 / 5F - July 2, 1975

  • Opinion No. 75 / 6F - October 10, 1975

    Summary: Distributor of a binding material for concrete used in construction sold such material to dealers who were primarily in the construction business. Dealers pay a $20,000 of which $19,000 is refundable by reduction of the purchase price of products. Distributor intends to enter into a state wide distributorship agreement with the largest dealer to warehouse and sell the material and set up instructional training programs. Distributor is prohibited from establishing a marketing plan or system for dealers. Distributor conceded the existence of a franchise fee and trademark license. Commissioner concluded that since the only instructional programs concern the proper application and use of the material and do not cover marketing, sales or accounting, no marketing plan or system existed and the arrangement was not a franchise. Commissioner concluded that agreements between dealer and distributors are also not area franchises.

    Key Words: Section 31005, Release No. 3-F, Section 31008, prescribed marketing plan or system, franchise fee, substantial association with commercial symbol