Instructions on How to File a Complete Franchise Application

An application is complete on the date and time that the Department of Financial Protection and Innovation (Department) receives:  (1) The correct filing fee (See Corporations  Code section 31500); (2) a complete Franchise Disclosure Document (FDD) (clean and marked copy as applicable under Rule 310.122.1); and (3) ALL required documents (See Corporations Code sections 31116 and 31121).

If any part of the application is missing, the application will not be deemed complete and may be denied under Corporations Code section 31115.

List of Documents

• Cover Letter
• Uniform Franchise Registration Application
• Verification/Certification
• Customer Authorization of Disclosure of Financial Records
• Uniform Consent to Service of Process
• Corporate/LLC Acknowledgement
• Supplemental Information Page
• Sales Agent Disclosure Form(s)
• Internet Ad Exemption Notice
• Franchisor Disclosure Document (“FDD”)
• Marked Copy of the FDD and Exhibits
• Audited Financial Statements
• Auditor’s Consent
• Financial Assurance

An application is incomplete and deemed Deficient and NOT filed if:

1. Franchisor failed to pay the correct filing fee;
2. Franchisor failed to provide a Complete Franchise Disclosure Document (clean and marked as applicable); or
3. Franchisor failed to provide any required document(s).

An application is Grossly Deficient if it does not substantively comply with the Guidelines for Franchise Registration. If the Department determines an application is Grossly Deficient, the franchisor may be asked to withdraw the application. Grossly Deficient files may be denied under California Corporations Code section 31115.
For more information on the documents listed above, or more specific requirements, please visit: Guidelines for Franchise Registration.

Only when a Complete Application has been filed and all issues raised in the Department’s comments have been resolved, will the application become Automatically Effective on the 30th business day thereafter at 12:00 p.m. Pacific Standard Time.

A permanent identification number is assigned to each separate franchise program. This number references the franchisor in the DocQNet database.

A single franchisor may have multiple Org-IDs if it offers multiple franchise programs (e.g., one Org-ID is assigned to a unit franchise program, another Org-ID is assigned to a sub-franchisor program, and another Org-ID is assigned to an area representative program).

A unique identification number is assigned to each application filed with the Department. This number references a specific application filed and stored in the DOCQNET database.

A franchisor who does not have an effective registration or is not eligible for exemption must file a registration application in accordance with the California Guidelines for Franchise Registration before offering or selling a franchise in this state. (See Corporations Code section 31111 and Rule 310.111)

To facilitate timely processing, an Application Facing Page and a Verification/Certification Form should be included with this filing.

Include a complete clean and marked copy of the FDD if the registration has expired and the franchisor is now filing an application for registration. (See Rule 310.122.1)

A franchisor who has previously registered a franchise may renew the registration for an additional period before the expiration of the registration.  (See Section 31121)  If the registration period has expired and the franchisor has not filed for a renewal of the registration, the franchisor must file an application for registration in accordance with Corporations Code section 31111.

It is required that an Application Facing Page and a Verification/Certification Form be included with this filing.

Include a complete clean and marked copy of the FDD. (See Rule 310.122.1)

A franchisor shall promptly file an application to amend the registration when there has been ANY material change in the information contained in the original application as submitted, amended or renewed. (See Section 31123)

When filing a Post-Effective Amendment, the Department recommends including a Cover Letter setting forth exactly what change was made to the original application and where such change can be found in the registration document on file with the Department.

It is required that an Application Facing Page and a Verification/Certification Form be included with this filing.

Include a complete clean and marked copy if any change is made to the FDD. (See Rule 310.122.1)

Adding a Sales Agent to an existing registration must be submitted as a Post-Effective Amendment.

Material Modification(s) of an existing franchise agreement shall be filed in the form prescribed in Rule 310.125.

An Application Facing Page and a Verification/Certification Form must be included with this filing. (See Rule 310.125)

No person shall publish any advertisement offering a franchise in California if the franchise is subject to the registration requirements unless a true copy of the advertisement has been filed with the Commissioner at least three business days before the first publication or such advertisement has been exempted by rule of the Commissioner. (See Section 31156)

Please note that the applicant will not receive a response to the filing of advertising materials unless the Department has a comment or question about the filing. The Department does not send a written approval of advertising materials.

Advertising should be filed separate from Registration or Renewal Applications.

An Application Facing Page need not be filed with this document.

Notice of Violation(s) shall be filed under Rule 310.303 or 310.304 as applicable and contain the information required by said rules, respectively.

It is required that an Application Facing Page and a Verification/ Certification Form be included with this filing.

Rules

• Rule 310.100.2 Negotiated Sales
• Rule 310.100.4 Negotiated Sales Under Section 31109.1
• Rule 310.113.4 Release of Impound

Section 31109.1 & Rule 310.100.4

This section does not require filing of an application or notice with the Department.  But, the franchisor must comply with the conditions set forth in the Rule and refer to Rule 310.100.4 when describing the material negotiated term to the prospective franchisee, as required by Corporations Code section 31109.1, subdivision (a)(2)(A). The franchisor must also certify or declare in an appendix to its application for renewal that it has complied with all of the requirements of this section.

OR

Rule 310.100.2

The franchisor must comply with the requirements set forth in Rule 310.100.2 and file a Notice of Negotiated Sale of Franchise in the form set forth in subsection (b) of the rule. The franchisor must also amend its FDD to include as an exhibit all Notices of Negotiated Sale filed with the Department in the preceding 12 months.  In addition, the franchisor must certify or declare in an appendix to its application for renewal that all notices have been filed with the Commissioner as required by the Rule.

The franchisor must comply with the requirements set forth in Rule 310.113.4.  For the purpose of subsection (d) of the rule, the franchisor should provide a signed statement by the franchisee(s) that all of the franchisor’s obligations have been completely performed.  In addition, for the purpose of verification of the signatures, it is recommended that the franchisor also provide a copy of the signed franchise agreement.

An Application Facing Page need not be filed with this document.

Clearly state the name of the applicant, the Org-ID if known, and the franchisor’s fiscal year-end date.
Do not include an App-ID from a previous filing.

• CA Franchise Guidelines – Application Facing Page
• NASAA Form A

An authorized officer, manager or general partner of the franchisor should sign the application. If this form is signed by hand (i.e., with a “wet signature”) and submitted via paper copy to the Department, the form must be notarized (see Notary Acknowledgment instructions below).  If this form is electronically signed using an e-signature software and submitted through DocQNet, no notarization is required.

• CA Franchise Guidelines – Form C
• NASAA Form A

• CA Guidelines

Not required for California entities (i.e., California corporations, California limited partnerships, or California limited liability companies (See Section 31155)). If this form is signed by hand (i.e., with a “wet signature”) and submitted via paper copy to the Department, the form must be notarized (see Notary Acknowledgment instructions below).  If this form is electronically signed using an e-signature software and submitted through DocQNet, no notarization is required.

• CA Guidelines Form D
• NASAA Form C

The Verification/Certification and Consent to Service of Process forms each require a notary acknowledgment. The acknowledgments should be on the form required by applicable law and uploaded together with the form being notarized.

• CA Guidelines

Alternatively, franchisors may submit NASAA’s Cost and Source of Funds Form.

• CA Guidelines Form B
• NASAA Form B

Alternatively, franchisors may submit NASAA’s Franchise Seller Disclosure Forms.
Complete a form only for each person offering and selling the franchise in California.  Do not submit forms for individuals who will not sell in California.

• CA Guidelines Form E
• NASAA Form D

This notice is required annually. (See Rule 310.156.3)

Use plain English with all exhibits, including, but not limited to, the Franchise Agreement or other agreements with attachments, List of Current and Former Franchisees, List of Agents for Service of Process, List of State Administrators, Financial Statements, Table of Contents to the Operating Manual (if needed), California State Addendum, and Receipt pages.

The only time a marked copy of the FDD and exhibits are not included is if it is the first franchise registration filed in California.

California requires audited financial statements or, for eligible first-time franchisors, a Reviewed financial statement. See Required Financial Statements in Guidelines for Franchise Registration. (See Rule 310.111.2)

An Auditor’s Consent is a signed consent by the certified public accountant or firm that audited the financial statements. The consent must refer to the legal name of the franchisor, the issuance date of the FDD and the date of the auditor’s report.

When the franchisor does not demonstrate a financial ability to meet its obligations without relying on the franchisee’s funds, the Department may impose a financial assurance condition.

The following are examples of financial assurances:

• Signed Guarantee of Performance by Guarantor
• Signed Escrow/Impound Agreement with a California bank (see Rule 310.113.3) and Receipt Page
• Copy of Facing Page of Surety Bond showing the amount and effective period
• Disclosure of the fee deferral language in Item 5 or the California State Addendum
• Evidence of a capital infusion (redacted bank statement) with an undertaking to maintain a reasonable amount of working capital (to be determined on a case by case basis by the Department) throughout the registration period

The Commissioner may by notice to the franchisor order an application to be abandoned upon failure of the franchisor within a reasonable time to respond to any request for additional information or otherwise to complete the showing required for action upon the application.

There is no refund of the filing fee paid upon abandonment.

The franchisor may with the consent of the Commissioner withdraw an application.

There is no refund of the filing fee paid upon withdrawal.

If you have questions about the California Franchise Investment Law, contact the Consumer Services Office (“CSO”) toll-free at (866) 275-2677 or (916) 327-7585 or by email, [email protected]. The Department provides guidance but does not provide legal advice.

If you are seeking a status update on a pending application, do not contact the attorneys directly. Call Consumer Services toll-free at (866) 275-2677 or (916) 327-7585.