Part 7 - FRANCHISE BROKERS

California Corporations Code — §§ 31520-31528

Sections (9)

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

(a)A franchise broker shall register by filing online all of the following with the commissioner:

(1)A completed Uniform Franchise Broker Disclosure Document, as created and modified by the commissioner, that is signed and verified as true and correct by the filer.

(2)Any additional documents or exhibits prescribed by the commissioner.

(3)The required registration fee, as set forth in Section 31500.

(4)Copies of financial securities and insurance policies the commissioner requires the franchise broker to obtain and maintain.

(b)Subject to Section 31522, the registration shall be effective upon filing a complete application, including all required documents, and paying all applicable fees.

(c)Subject to Section 31522, a registration pursuant to this section shall expire on December 31 of the year in which the registration became effective.

§ 31521

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

(a)A registered franchise broker shall promptly notify the commissioner in writing by an application to amend the registration of any material change in the information contained in the latest Uniform Franchise Broker Disclosure Document filed by the

franchise broker.

(b)The commissioner may by rule further define what shall be considered a material change for those purposes, and the circumstances under which an amended Uniform Franchise Broker Disclosure Document must be filed.

(c)The commissioner may issue a stop order pursuant to Section 31522

if the commissioner finds that any of the material changes provided pursuant to this section constitute a failure to comply with any of the provisions of this division or any rule issued by the commissioner pertaining to this division.

§ 31522

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

(a)The commissioner may summarily issue a stop order suspending or revoking any registration under this part if the commissioner finds that the franchise broker has failed to comply with any of the provisions of this division or any rule issued by the commissioner pertaining to this division.

(b)A

franchise broker shall not offer or sell a franchise in this state while a stop order issued pursuant to subdivision (a) is in effect.

(c)Upon issuance of a stop order, the commissioner shall promptly provide a notice to the franchise broker that contains all of the following:

(1)Notice that the stop order has been issued.

(2)The reasons for issuance of the stop order.

(3)Notice that the matter will be set for hearing within

15 business days after the commissioner receives a written request for hearing from the franchise broker, unless the franchise broker consents to a later date.

(d)The commissioner may modify, vacate, or extend a stop order until there has been a final determination of the matter at the hearing.

(e)A hearing under this section shall be conducted pursuant to Chapter 5

(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and the commissioner shall have all the powers granted under those provisions.

(f)If the franchise broker does not request a hearing within 30 days after receipt of the notice required by subdivision (c), the stop order shall remain in effect until it is modified or vacated by the commissioner.

§ 31523

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

A registered franchise broker offering a franchise for sale in this state shall keep and maintain a complete set of books, records, and accounts of that offer for a period of five calendar years.

§ 31524

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

A registered franchise broker is subject to, and shall comply with, all of the following:

(a)Section 31154.

(b)Section 31155.

(c)Section 31156.

(d)Section 31157.

(e)Section 31158.

§ 31525

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

(a)It is unlawful for a franchise broker to offer or sell a franchise in this state unless the franchise broker is registered pursuant to this part.

(b)For purposes of this section, an offer or sale of a franchise is made in this state if any of the following apply:

(1)The prospective franchisee resides in this state.

(2)The prospective franchisee has its principal place of business in this state.

(3)The franchised business will be located in this state.

§ 31526

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

(a)It is unlawful for a franchise broker to communicate with a prospective franchisee about investing in a franchise opportunity that is subject to registration pursuant to this division unless the

franchise broker first provides to the prospective franchisee a copy of the completed Uniform

Franchise Broker Disclosure Document.

(b)A franchise broker may provide the Uniform Franchise Broker Disclosure Document to a prospective franchisee through electronic means, subject to any requirements or conditions imposed by the commissioner.

§ 31527

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025. Conditionally operative on or after July 1, 2026, pursuant to Sec. 31528

For purposes of this part, the Uniform Franchise Broker Disclosure Document shall contain all of the following information:

(a)A franchise broker cover page, as created and modified by the commissioner, that contains standardized language regarding

franchise brokers, including, but not limited to, all of the following:

(1)The types of sellers.

(2)The franchise brokers’ role in the franchise sales process.

(3)Services a franchise broker

might provide.

(4)Different ways a franchise broker might be compensated for its services.

(5)Examples of questions a prospective franchisee might ask a franchise broker.

(b)All of the following information about the

franchise broker:

(1)Legal name.

(2)Trade name.

(3)Year and state of formation.

(4)Principal place of business.

(5)Owners.

(6)Directors and officers.

(7)Contact information.

(8)The

franchise broker’s

broker network or franchise sales organization.

(c)The franchise broker’s professional experience during the last five years, including, but not limited to, employers, principal positions, each position’s location, and the month and year of each position’s start date and end date.

(d)Administrative, civil, or criminal actions alleging that the franchise broker,

or an owner, officer, or director of the franchise broker, violated any franchise, antitrust, or securities law, or committed fraud, unfair or deceptive practices, or similar violations, whether pending or resolved, within the last five years.

(e)The industries of the brands the franchise broker represents and how many brands within each industry the

franchise broker represents.

(f)A description of the services performed by the franchise broker.

(g)How the franchise broker is compensated, including, but not limited to, how the amount of any consideration the

franchise broker receives is calculated.

(h)Whether a broker network, broker organization, or franchise sales organization may receive any additional consideration.

(i)The brands for whom the franchise broker sold a franchise anywhere in the United States or its territories during the last calendar year for which the franchise broker received or is entitled to receive compensation, including, but not limited to, the total number of units sold for the brand.

§ 31528

Added by Stats. 2024, Ch. 518, Sec. 5. (SB 919) Effective January 1, 2025.

The implementation of this part is contingent upon an appropriation for its purposes by the Legislature in the annual Budget Act or other statute. This part shall become operative on the later of:

(1)July 1, 2026, or (2) the first anniversary of the date on which the appropriation is made.