Starting a Franchise in California
When it comes to franchising rules, each state will have its own system for setting up a franchise. In California, if you are the franchisor, you have to register the franchise with the state government (in accordance with the Franchise Investment Law). The institution that deals with such matters is the California Department of Business Oversight; this department handles both the registration and renewal of franchises. There are very specific steps a franchisor must go through in order to properly register a franchise prior to selling it. This article will address some of the steps involved in the process.
The first important note is that this process and its renewal have associated costs. To file a franchise, there is a $675 fee, and to renew a franchise registration, there is a $450 fee. You must submit an application that first includes a cover letter. This letter will include details like applicant name, fiscal year, and Org-Id number. Furthermore, the registration application and corporate acknowledgment must be signed by a general partner, officer, or manager of the franchisor.
Other documents that must be included in the application are the following: sales agent (person selling the franchise) disclosure forms, customer authorization of disclosure of financial records, state addendum, Internet ad exemption notice, audited financial statements signed by an accountant, franchise disclosure document, uniform consent to service of process, supplemental information, and guarantee of performance.
The application will be assigned to a lawyer who will then respond to it with comments and questions. Depending on the completion of the initial application and response to the queries of the lawyer, the applicant will receive a letter from the Department within 30 days examining the process. Once all of the necessary steps have been taken, the applicant will receive an Order of Effectiveness, which makes the registration effective. Following this registration, it must be renewed every year by the deadline.