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California Franchise Registrations and Renewals

The state of California requires franchise registration from prospective franchisors, as well as compliance with a host of other California franchise laws.  The franchise registration involves the submission of a series of documents including but not limited to the application, the franchise disclosure documents, financial statements, certification page, sales agent disclosures, and the registration fee.

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The financial statements must demonstrate that there is sufficient capital to meet various obligations.  In other words, you cannot rely on franchise fees to meet initial obligations.  The rules are to prevent large corporations from taking advantage of smaller potential franchisees, or developing some type of unfair pyramid scheme.  For more information, see here. Failure to register and file the disclosure documents may result in significant liability.

Keep in mind that the registration normally expires 110 days after the date of its next fiscal year.  As such, franchise renewals must be filed every year.  Failure to do so may lead to the franchisor to have to temporarily cease selling franchises in California until a new registration order is issued.

As such, it is important to know your franchise-related renewal filing deadlines (often in April of each year).  Franchisors can start preparing for the renewal early by compiling updated information.  Franchisors can also use the renewal time to implement any changes to their franchise system, if necessary.  In addition, remember that any changes to the disclosure statements or franchise agreements may require changes elsewhere, such as in the franchise promotional materials, manuals, and website advertisements.  As always, it is important to present the renewal application in an easy format for the examiner, so that you can expedite the renewal process.


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