Commissioner's Opinion No. 77 / 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. Phillip E. Diamond
Attorney at Law
Landels, Ripley & Diamond
450 Pacific Avenue
San Francisco, California 94133

Dear Mr. Diamond:

The request for an interpretive opinion, contained in your letter dated August 11, 1976, has been considered by the Commissioner. Your letter raises the question whether the offer and sale by Canada Dry Corporation ("Canada Dry") of a franchise to bottle soft drinks under the Canada Dry label in Berkeley, California, to Beatrice Foods ("Beatrice") is subject to the registration requirements of Section 31110 of the Franchise Investment Law ("Law").

The 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 franchised 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 received at the place to which it is directed, and an offer to sell is accepted in this state when acceptance is communicated to the offeror in this state. No provision is made that the offer or sale of a franchise is to be deemed made "in this state" solely by reason of the fact that the franchised business will be operated in this state, or that the franchisee who was neither domiciled here nor physically present in this state at the time of the offer or sale of the franchise, subsequently comes into this state for the purpose of the operation of the franchised business or for other purposes (Comm. Op. No. 71/56F).

You have represented that "as to the act of offering or accepting, the contracts between the two corporations have occurred outside of California, and the contract will be made outside of this state. "Although the franchise will be operated in California, you have suggested that Beatrice is not "domiciled" in California. In this connection, you have represented that Beatrice is a Delaware Corporation with principal offices in Chicago, Illinois. No executive officer is a resident in California. Central control of Beatrice is in Chicago where the Board of Directors customarily meets and where the executive committees and legal and accounting departments are located. Less than 10% of Beatrice's total sales occur in California, less than 10% of its aggregate capital assets are located in California, and less than l0% of its total payroll is paid in California.

Under these circumstances, we concur in your opinion that Beatrice is not "domiciled" in California as that term is used in Section 31013 of the Law. Accordingly, it is our opinion that the offer and sale of the franchise by Canada Dry to Beatrice, under the circumstances described in your letter, is not subject to the registration requirements of Section 31110 of the Law.

Dated: Sacramento, California
March 15, 1977

By order of
WILLIE R. BARNES
Commissioner of Corporations

By __________________
ROBERT E. LA NOUE
Assistant Commissioner
Office of Policy
(916)322-3633