Commissioner's Opinion No. 75 / 3F

State of California Department of Corporations

Willie R. Barnes, 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. John B. Smith
Legal Counsel
Personal Pool of America, Inc.
521 South Andrews Avennue
Ft. Lauderdale, FL 33301

Dear Mr. Smith:

The request for an interpretive opinion, contained in your letter dated January 9, 1975, has been considered by the Commissioner. Your letter raises the question whether the offer and sale by Labor Pool of Los Angeles, Inc. {"LPLA") of a franchise and a portion of a franchise between LPLA and Personnel Pool of America, Inc., a Florida corporation ("Personnel Pool"), is subject to the registration requirement of Section 31110 of the Franchise Investment Law ("Law").

You have represented that Personnel Pool is engaged in the business of providing temporary help services of various types through a "business format" franchise system, under which it licenses the use of its plans, procedures and systems together with one or more of its trade names and marks identified as "Labor Pool", "Medical Personnel Pool", "Office Personnel Pool" and "Domestic Personnel Pool". Personnel Pool has not registered the offer and sale of its franchises in California, although it has a number of franchises in this state which were granted prior to the effective date of the Law.

You have further represented on January 21, 1963, Personnel Pool granted LPLA a "Labor Pool" franchise which has been operated in Los Angeles since that date. Subsequently, Personnel Pool granted LPLA, through its shareholders, a "Personnel pool" franchise for Orange, Riverside, Ventura and San Bernadino Counties. This franchise has never commenced operation nor engaged in any business under its agreement.

LPLA proposes to sell all of its franchise rights with respect to the "Personnel Pool" franchise in one or more counties to a resident of California.. All consideration for the sale of portion of said franchise will pass from the new franchisee to LPLA and no consideration for the sale will pass between the new franchisee and Personnel Pool. Personnel Pool will not participate in the offer and sale of any such portion of the franchise, but it proposes to exercise its right to approve the new franchisee. In addition, both Personnel Pool and LPLA propose to have the new franchisee enter into a standard franchise agreement directly with Personnel Pool. LPLA also proposes to sell its entire "Labor Pool" franchise to Mr. Norman A. Thoms, a resident of Florida, who will "undoubtedly move to Los Angeles, California to operate the franchise". All consideration with respect to this franchise will pass between Mr. Thoms and LPLA; however, as in the aforementioned transaction, both LPLA and Personnel Pool propose to have Mr. Thoms enter into a new agreement with Personnel Pool.

Section 31110 of the Law imposes a registration requirement on the offer and sale of a franchise in this state, unless an exemption is available. Section 31102 provides such an 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. That Section further provides that a sales not effected by or through a franchisor merely because a franchisor has a right to approve or disapprove a different franchisor.

In our opinion, the requirement that a new franchisee enter into a new agreement with the franchisor is a means by which a franchisor formally approves the new franchisee and does not necessarily eliminate the exemption provided by Section 31102. Accordingly, assuming that the agreement between Personnel Pool and unnamed new franchisee as well as Mr. Thoms is not materially different from the existing franchise agreements between Personnel Pool and LPLA, it is our opinion that the offer and sale of the franchise and a portion of the franchise by LPLA, under the circumstances described by you as outlined above, is exempt from the registration requirement of Section 31110 of the Law by virtue of Section 31102.

Dated: Sacramento, California
March 28, 1975

By order of
WILLIE R. BARNES
Commissioner of Corporations

By __________________
ROBERT E. LA NOUE
Assistant Commissioner
Office of Policy