California Franchise Registration
California franchise regulation is a statewide requirement which entails the filing and registration of your franchise before you may offer it for sale. 3 min read
California franchise regulation is, in general, required by the state of California. California's Franchise Investment Law and the statewide regulation of Franchise Disclosure Documents (FDDs) are governed by the California Department of Business Oversight (DBO). You must file and register your franchise with the California Department of Business Oversight before you may offer a franchise for sale.
Once your franchise is registered, you must renew the registration annually. In addition, you must comply with the California Franchise Investment Law requirements, which define a franchise as a business opportunity involving a marketing plan, the license of a trademark, and the direct or indirect payment of a fee.
How Do I Register a Franchise in California?
When starting a franchise, the initial application must include:
- Filing fee ($675)
- Cover letter with name of application, the Ord-ID number (if known), and the franchisor's fiscal year-end date
- Uniform Franchise Registration Application with a Signature Verification Page (signed and notarized) and Corporate Acknowledgement (completed by an officer or general partner of the franchisor or an individual with a power of attorney if the appropriate resolution is attached)
- Uniform Consent to Service of Process (required for all California entities excluding corporations)
- Franchise Disclosure Document (FDD) in plain English, with all exhibits such as the Franchise Agreement
- Customer Authorization of Disclosure of Financial Records
- Supplemental Income Page
- Sales Agent Disclosure Forms
- California State addendum
- Audited Financial Statements (with a signed consent by the CPA or accounting firm that audited the financial statements)
- Internet Ad Exemption Notice
- Guarantee of Performance or other financial assurances (if applicable)
- Advertising or promotional materials (if required)
The audited financial statements must include the following:
- A balance document dated within 90 days prior to the application filing date
- Profit and loss statements for the three fiscal years prior to the balance document
- Profit and loss statements for the period between the last fiscal year's end and the date of the balance document
If the FDD has been changed or updated, a complete copy including all exhibits must be sent along with copies of the changed pages with the changes clearly marked.
Once complete, mail the application, including all documents, to one of the following addresses:
California Department of Corporation
320 West 4th Street, Suite 750
Los Angeles, CA 90013
California Department of Corporation
71 Stevenson Street, Suite 2100
San Francisco, CA 94105
California Department of Corporations
1515 K Street, Suite 200
Sacramento, CA 95814
The length of time to obtain registration after submitting your application depends on the thoroughness of your registration application and FDD. In addition, quickly responding to comment letters from the attorney assigned to examine your application will speed up the process.
Exemptions to California Franchise Registration
In California, the Department of Business Oversight requires the registration of FDDs. However, in some extremely limited cases, you might be able to sell a franchise without first registering it. A franchisee that intends to purchase a franchise from a California franchisor but operate the franchise entirely outside of California may be exempt from registering it under the California Corporations Code Section 31105.
In addition, California Corporations Code Section 31106 includes a registration exemption for franchise sales that are purchased by experienced franchisees who meet specific requirements.
California Franchise Registration Renewal
Section 31121 of the California Franchise Investment Law requires you to renew your FDD registration annually before the date that your registration expires (usually April 20th). To find your registration expiration date, consult the Order of Effectiveness, which was issued to you when your registration was granted during the previous year. To file a franchise renewal application on time, you must file it at least 15 business days before the expiration date. Don't forget to count holidays when you determine the 15 business day period.
If you're unable to file your renewal application before your current registration expires, you'll have to file an entirely new registration application, which will cost you the initial filing fee.
If you've filed your renewal application at least 15 business days before your registration expiration date, the registration will automatically renew itself at noon (PST) on the date of which the previous registration is due to expire. If you've filed within the final 15 business days but still before the expiration date of the registration, the renewal will still be considered valid; however, the franchisor will not be allowed to offer or sell a franchise in California during those 15 business days.
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