Business Law

Opinion No. 72 / 43F

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. William J. Anthony
American Educational Dimensions, Inc.
2024 North Broadway
Santa Ana, CA 92706

Dear Mr. Anthony:

The request for an interpretive opinion contained in your letter dated September 1, 1972, as supplemented by your letter dated September 14, 1972, has been considered by the Commissioner. Your letters raise questions regarding the application of the requirements of the Franchise Investment Law to the sale or renegotiation of a franchise agreement between Airline Schools Pacific, Incorporated, a California corporation (“Schools”), and certain other parties. You have submitted a copy of an agreement between Schools and a Mr. Eugene Keller of Glendora, California, which would suggest that the agreement is with Mr. Keller, but your letters indicate that the agreement is between Schools and Airline Schools Pacific, Inc. of Covina, a.k.a. Keller Training Institute Inc. (“Covina”) Apparently, American Educational Dimensions, Inc. (“American”), has negotiated or is about to purchase Covina or an 80% interest in Covina.

The Franchise Investment Law prescribes certain requirements with respect to the offer or sale of franchises. These requirements are imposed upon franchisors and subfranchisors. Section 31510 of the Law authorizes the Commissioner of Corporations to issue interpretive opinions for the principal purpose of providing a procedure by which members of the public can protect themselves against liability which otherwise might result from their failure to comply with the requirements of the Law. Section 31511 of the Law provides that no such liability shall be incurred by any acts done or omitted in good faith in conformity with a written interpretive opinion of the Commissioner.

Since the requirements of the Law are imposed on franchisors and subfranchisors and not on franchisees, the Commissioner, pursuant to Section 31511, may not issue interpretive opinions at the request of franchisees, and he has no authority under the Law to adjudicate disputes or controversies which may exist between franchisors and franchisees. For that reason, since American is interested in this matter only as a franchisee by way of succession to the rights of Mr. Keller or Covina, we cannot comply with your request for an interpretive opinion.

As regards your question whether Schools is approved for the sale of franchises, please be advised that the application of Schools for registration of the offer and sale of franchises has been filed with this Department. The registration has not yet become effective.

Dated: San Francisco, California
December 27, 1972

By order of
Commissioner of Corporations

By __________________
Assistant Commissioner
Office of Policy

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