SECTIONS 20000-20010 - California Statutes

BUSINESS AND PROFESSIONS CODE

SECTION 20000-20010

20000. This chapter shall be known and may be referred to as the
California Franchise Relations Act.

20001. As used in this chapter, "franchise" means a contract or
agreement, either expressed or implied, whether oral or written,
between two or more persons by which:
(a) A franchisee is granted the right to engage in the business of
offering, selling or distributing goods or services under a
marketing plan or system prescribed in substantial part by a
franchisor; and
(b) The operation of the franchisee's business pursuant to that
plan or system is substantially associated with the franchisor's
trademark, service mark, trade name, logotype, advertising, or other
commercial symbol designating the franchisor or its affiliate; and
(c) The franchisee is required to pay, directly or indirectly, a
franchise fee.
(d) "Franchise" does not include any of the following:
(1) Any franchise governed by the Petroleum Marketing Practices
Act (P.L. 95-297).
(2) Lease departments, licenses, or concessions at or with a
general merchandise retail establishment where the lease department,
licensee, or concessionaire is incidental and ancillary to the
general commercial operation of the retail establishment. Sales of a
leased department, license, or concessionaire are incidental and
ancillary to the general commercial operation of the retail
establishment if they amount to less than 10 percent of the
establishment's sales.
(3) A nonprofit organization operated on a cooperative basis by
and for independent retailers which wholesales goods and services
primarily to its member retailers and in which all of the following
is applicable:
(A) Control and ownership of each member is substantially equal.
(B) Membership is limited to those who will use the services
furnished by the organization.
(C) Transfer of ownership is prohibited or limited.
(D) Capital investment receives no return.
(E) Substantially equal benefits pass to the members on the basis
of patronage of the organization.
(F) Members are not personally liable for obligations of the
organization in the absence of a direct undertaking or authorization
by them.
(G) Services of the organization are furnished primarily for the
use of the members.
(H) Each member and prospective member is provided with an
offering circular which complies with the specifications of Section
31111 of the Corporations Code.
(I) No part of the receipts, income, or profit of the organization
are paid to any profitmaking entity, except for arms-length payments
for necessary goods and services and members are not required to
purchase goods or services from any designated profitmaking entity.
(J) The nonprofit organization is subject to an action for
rescission or damages under Section 3343.7 of the Civil Code if the
organization fraudulently induced the plaintiff to join the
organization.

20002. A "franchisee" is a person to whom a franchise is granted.

20003. A "franchisor" is a person who grants or has granted a
franchise.

20004. "Area franchise" means any contract or agreement between a
franchisor and a subfranchisor whereby the subfranchisor is granted
the right, for consideration given in whole or in part for such
right, to sell or negotiate the sale of franchises in the name or on
behalf of the franchisor.

20005. A "subfranchisor" is a person to whom an area franchise is
granted.

20006. "Franchise" includes "area franchise."

20007. "Franchise fee" means any fee or charge that a franchisee or
subfranchisor is required to pay or agrees to pay for the right to
enter into a business under a franchise agreement, including, but not
limited to, any payment for goods and services.
However, the following shall not be considered the payment of a
franchise fee:
(a) The purchase or agreement to purchase goods at a bona fide
wholesale price if no obligation is imposed upon the purchaser to
purchase or pay for a quantity of goods in excess of that which a
reasonable businessperson normally would purchase by way of a
starting inventory or supply or to maintain a going inventory or
supply.
(b) The payment of a reasonable service charge to the issuer of a
credit card by an establishment accepting or honoring that credit
card.
(c) Amounts paid to a trading stamp company under Chapter 3
(commencing with Section 17750) of Part 3 of Division 7 by a person
issuing trading stamps in connection with the retail sale of
merchandise or service.
(d) The payment, directly or indirectly, of a franchise fee which,
on an annual basis, does not exceed the sum of one hundred dollars
($100).
(e) The payment of a sum of not exceeding one thousand dollars
($1,000) annually on account of the purchase price or rental of
fixtures, equipment, or other tangible property to be utilized in,
and necessary for, the operation of the franchised business, if the
price or rental so charged does not exceed the cost which would be
incurred by the franchisee acquiring the item or items from other
persons or in the open market.

20008. "Person" means an individual, a corporation, a partnership,
a limited liability company, a joint venture, an association, a joint
stock company, a trust or an unincorporated organization.

20009. The regulations, releases, guidelines and interpretive
opinions of the Commissioner of Corporations under the Franchise
Investment Law (Division 5 (commencing with Section 31000) of Title 4
of the Corporations Code) regarding whether or not an agreement
constitutes a "franchise" within the meaning of that law shall be
prima facie evidence of the scope and extent of coverage of the
definition of "franchise" under this chapter; provided, however, the
burden of proving an exemption or an exception from a definition is
upon the person claiming it.

20010. Any condition, stipulation or provision purporting to bind
any person to waive compliance with any provision of this law is
contrary to public policy and void.