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2007/2008 Changes in California Franchise Registration Requirements
Please note that the North American Securities Administrators Association, Inc.’s (“NASAA”) Uniform Franchise Offering Circular (UFOC) disclosure document format is valid until June 30, 2008, regardless of when the registration was approved in California. The Federal Trade Commission has withdrawn permission from all franchisors to use the UFOC disclosure document prepared under the current NASAA UFOC Guidelines after June 30, 2008.
On and after July 1, 2008, all franchisors must use a franchise disclosure document that complies with the FTC Franchise Rule, 16 CFR 436, as amended, 72 FR 15444 (March 30, 2007), (the "FTC Franchise Rule"). In its June 22, 2007 Interim Franchise Statement of Policy, NASAA incorporated the disclosures required under the FTC Franchise Rule for the Uniform Franchise Disclosure Document (“UFDD”). The California Department of Corporations announced in its June 28, 2007 Release 17-F that the Department would begin accepting the UFDD as of July 1, 2007 and that on/after July 1, 2008, only the UFDD can be used to offer and sell franchises in California regardless of when a UFOC may have been registered. All registered franchisors wanting to offer or sell franchises on and after July 1, 2008 must file the UFDD as a part of its 2007/2008 application process or file and have approved a post-effective amendment application with the UFDD before any franchises can be offered or sold on or after July 1, 2008. Therefore, be advised that no UFOC may be distributed to prospective franchisees after July 1, 2008 under any circumstances.
In addition, the following new items are being added to the California Special Instructions of the soon to be released 310.111 UFDD Packet (10/07), which will include fillable franchise forms available from our website. See http://www.corp.ca.gov/forms/securities.asp
7. NOTE: Civil Code §1189 requires that any notary’s certificate of acknowledgment taken within this state must be in the form attached. Any certificate of acknowledgment taken in another state shall be sufficient in California if it is taken in accordance with the laws of the state where the acknowledgment is made. In that instance only, the current NASAA form would be acceptable in California.
8. As of January 1, 2008, California Corporations Code Section 31119 requires that the offering circular together with all proposed agreements relating to the sale of the franchise be delivered to prospective franchisees at least 14 days prior to execution by the prospective franchisee of any binding franchise or other agreement, or at least 14 days prior to the receipt of any consideration, whichever occurs first.
9. As of January 1, 2008, California Corporations Code Section 31155 requires that all applicants for registration, except for California corporations, California limited partnerships, or California limited liability companies, file an irrevocable consent appointing the Commissioner to be the applicant’s attorney to receive service of any lawful process in any non-criminal suit, action, or proceeding against the applicant which arises under the Franchise Investment Law.
10. As of July 1, 2008, only the UFDD can be used as the offering document to offer and sell registered franchises in California, regardless of when the franchisor registered its franchise system and regardless of any prior registration involving a UFOC