California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2.6 - Franchises › Section 310.114.1 - Offering Circular

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
				General. Each offering circular shall contain the information required by the
				Uniform Franchise Registration Application, as defined in Section
				310.111(b), and
				as modified by this section.
(b)
				Manner of Presenting Information. Present the information in the offering
				circular in a clear, concise fashion that is readily understandable by a person
				unfamiliar with the franchise business. Define the franchisee as "you" in Item
				1 and use this description throughout the offering circular. In Item 1 use the
				word "we," initials or one or two words to refer to the franchisor. Use
				different initials or a different one or two words to refer to other persons
				contracting with the franchisee under the franchise agreement. Except in the 23
				Item titles, use these initials or word(s) to describe these persons or
				entities throughout the offering circular.
(c) California Instructions for the UFOC.
(1) A preface, exhibit or appendix to the
				UFOC must state: "THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY
				OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED
				TOGETHER WITH THE OFFERING CIRCULAR".
(2) "Salesman Disclosure Form" and Item 3.A
				of the Body of the UFOC: In an initial application to register the offer and
				sale of a franchise, do not disclose a pending action involving an arrest that
				did not result in conviction or plea of nolo contendere.
(3) Item 3.C: In addition to the information
				required by Item 3.C, state whether the franchisor, any person or franchise
				broker in Item 2 of the UFOC is subject to any currently effective order of any
				national securities association or national securities exchange, as defined in
				the Securities Exchange Act of 1934,
				15 U.S.C.A.
				78a et seq., suspending or expelling such
				persons from membership in that association or exchange. The information
				required by this provision may be included in Item 3 or in a preface, exhibit
				or appendix, which is part of the offering circular. If the information is in a
				preface, exhibit or appendix, a reference to the preface, exhibit or appendix
				shall be prominently set forth in Item 3.
(4) Item 5: If the initial fee can vary,
				include a mathematical formula which enables the franchisee to calculate the
				specific dollar amount of the franchise fee.
(5) Item 17: Additional Paragraph(s)
				Required. The paragraph(s) required by this provision may be included in Item
				17 or in a preface, exhibit or appendix, which is part of the offering
				circular. If the paragraph(s) are in a preface, exhibit or appendix, a
				reference to the preface, exhibit or appendix shall be prominently set forth in
				Item 17.
(A) In addition to the information
				required by Item 17, all offering circulars shall contain the following
				paragraph: California Business and Professions Code Sections
				20000
				through
				20043
				provide rights to the franchisee concerning termination or non-renewal of a
				franchise. If the franchise agreement contains a provision that is inconsistent
				with the law, the law will control.
(B) If the franchise agreement contains one
				or more of the provisions referred to in the following paragraph(s), the
				appropriate paragraph(s) shall be included:
i. The franchise agreement provides for
				termination upon bankruptcy. This provision may not be enforceable under
				federal bankruptcy law (11
				U.S.C.A. Sec. 101 et seq.).
ii. The franchise agreement contains a
				covenant not to compete which extends beyond the termination of the franchise.
				This provision may not be enforceable under California law.
iii. The franchise agreement contains a
				liquidated damages clause. Under California Civil Code Section
				1671, certain
				liquidated damages clauses are unenforceable.
iv. The franchise agreement requires binding
				arbitration. The arbitration will occur at (indicate sites) with the costs
				being borne by (explanation). Prospective franchisees are encouraged to consult
				private legal counsel to determine the applicability of California and federal
				laws (such as Business and Professions Code Section
				20040.5,
				Code of Civil Procedure Section
				1281,
				and the Federal Arbitration Act) to any provisions of a franchise agreement
				restricting venue to a forum outside the State of California.
v. The franchise agreement requires
				application of the laws of (indicate jurisdiction). This provision may not be
				enforceable under California law.
(6) Item 19: If any earnings claim is made,
				and the earnings claim figure(s) does (do) not include either costs of sales or
				operating expenses, then, in addition to the information required by Item 19,
				all offering circulars shall contain the following statement prominently set
				forth in Item 19 or set forth in a preface, exhibit or appendix, which is part
				of the offering circular. If the statement is set forth in a preface, exhibit
				or appendix, a reference to the preface, exhibit or appendix shall be
				prominently set forth in Item 19: "The earnings claims figure(s) does (do) not
				reflect the costs of sales, operating expenses, or other costs or expenses that
				must be deducted from the gross revenue or gross sales figures to obtain your
				net income or profit. You should conduct an independent investigation of the
				costs and expenses you will incur in operating your (franchised business).
				Franchisees or former franchisees, listed in the offering circular, may be one
				source of this information."