Business Law

Opinion No. 73 / 12F

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. Sidney A. Copilow
Attorney at Law
1900 Avenue of the Stars
Suite 1060
Century City, CA 90067

Dear Mr. Copilow:

The request for an interpretive opinion contained in your letter dated November 13, 1972, has been considered by the Commissioner. Your letter raises the question whether the offer and sale of a franchise by Good Stuff Natural Foods, Inc., a California corporation (“Good Stuff”), under the circumstances described by you, is exempt from the registration requirement of Section 31110 of. the Franchise Investment Law. This question is answered in the negative.

You have represented that Good Stuff is engaged in the business of making and selling bread and cake using natural food products under the trade name “Good Stuff Natural Foods”. Recently an individual approached Good Stuff offering a sum certain, to be paid over a period of one year, for the right to distribute the products on an exclusive basis in a given territory. The individual will pick up the bakery products in the morning directly from the bakery or a wholesale price and distribute the products to existing customers of Good Stuff as well as to new customers, all for a retail price.

You express the opinion that this transaction contains all of the elements which would constitute it a “franchise” within the definition of Section 31005 of the Franchise Investment Law. Good Stuff contemplates that this will be a single transaction and you have represented that all parties are well acquainted with each other.

Section 31110 of the Law imposes a registration requirement on any person offering or selling franchises in this state on or after April 15, 1971, unless an exemption is available. As stated in Policy Letter 45F, neither the Law nor the rules promulgated thereunder by the Commissioner, provide an exemption for offers or sales of franchises based on a prior relationship between the franchisor and the proposed franchisee or a limited number of franchises which a franchisor will be offering.

Accordingly, if Good stuff proposes to offer or sell a “franchise”, as defined in Section 31005 of the Franchise Investment Law, it is our opinion that such offer or sale is subject to the registration requirement of Section 31110, notwithstanding the not existing personal relationship between the parties.

Inasmuch as interpretive opinions are issued for the principal purpose of providing a procedure by which members of the public can protect themselves against liability for acts done or omitted in good faith in reliance upon the administrative determination made in the opinion, and since there can be no such reliance where the Commissioner asserts jurisdiction with respect to a particular situation or determines that a legal requirement is applicable, advice to that effect, as contained in this letter, does not constitute an interpretive opinion.

Dated: San Francisco, California
March 20, 1973

By order of 
Commissioner of Corporations

By __________________ 
Supervising Corporations Counsel
Office of Policy

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