California Clarifies Franchise Registration Rules

This posting was written by John W. Arden.

California has set out the rules for franchise disclosure and registration, as it transitions from acceptance of the Uniform Franchise Offering Circular to the Uniform Franchise Disclosure Document, prescribed by the new Federal Trade Commission franchise disclosure rule.

According to a release posted October 16 on the ABA Forum on Franchising list serve by the California Department of Corporations:

 The Uniform Franchise Offering Circular (UFOC) is valid until June 30, 2008, “regardless of when the registration was approved in California.”

 The FTC has withdrawn permission for franchisors to use the UFOC after June 30, 2008.

 Franchisors must use a franchise disclosure document that complies with the new FTC franchise rule after July 1, 2008.

 The California Corporations Commission began accepting the FTC’s Uniform Franchise Disclosure Document (UFDD) on July 1, 2007.

 A registered franchisor “must file the UFDD as part of its 2007/2008 application process or file and have approved a post-effective amendment application with the UFDD before any franchises can be offered or sold on or after July 1, 2008."

 Thus, “no UFOC may be distributed to prospective franchisees after July 1, 2008 under any circumstances.”

Instructions for the soon-to-be-released UFDD packet—which will include “fillable” franchise forms—will appear on the Corporations Commission’s web site:
http://www.corp.ca.gov/srd/franchise.htm

The release was signed by California Corporations Commissioner Preston DuFauchard and Lead Attorney, Securities Regulation Division, Henry Lew.