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Cal. Code Regs. tit. 10 § 310.114.1 : Investment — Commissioner of Financial Protection and Innovation — FRANCHISES — Offering Circular

(a) General. Each offering circular shall contain the information required by the Uniform Franchise Registration Application, as defined in Section 310.111(b), and as modified by this section.
(b) Manner of Presenting Information. Present the information in the offering circular in a clear, concise fashion that is readily understandable by a person unfamiliar with the franchise business. Define the franchisee as "you" in Item 1 and use this description throughout the offering circular. In Item 1 use the word "we," initials or one or two words to refer to the franchisor. Use different initials or a different one or two words to refer to other persons contracting with the franchisee under the franchise agreement. Except in the 23 Item titles, use these initials or word(s) to describe these persons or entities throughout the offering circular.
(c) California Instructions for the UFOC.
(1) A preface, exhibit or appendix to the UFOC must state: "THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE OFFERING CIRCULAR".
(2) "Salesman Disclosure Form" and Item 3.A of the Body of the UFOC: In an initial application to register the offer and sale of a franchise, do not disclose a pending action involving an arrest that did not result in conviction or plea of nolo contendere.
(3) Item 3.C: In addition to the information required by Item 3.C, state whether the franchisor, any person or franchise broker in Item 2 of the UFOC is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A. 78a et seq., suspending or expelling such persons from membership in that association or exchange. The information required by this provision may be included in Item 3 or in a preface, exhibit or appendix, which is part of the offering circular. If the information is in a preface, exhibit or appendix, a reference to the preface, exhibit or appendix shall be prominently set forth in Item 3.
(4) Item 5: If the initial fee can vary, include a mathematical formula which enables the franchisee to calculate the specific dollar amount of the franchise fee.
(5) Item 17: Additional Paragraph(s) Required. The paragraph(s) required by this provision may be included in Item 17 or in a preface, exhibit or appendix, which is part of the offering circular. If the paragraph(s) are in a preface, exhibit or appendix, a reference to the preface, exhibit or appendix shall be prominently set forth in Item 17.
(A) In addition to the information required by Item 17, all offering circulars shall contain the following paragraph:

California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination or non-renewal of a franchise. If the franchise agreement contains a provision that is inconsistent with the law, the law will control.

(B) If the franchise agreement contains one or more of the provisions referred to in the following paragraph(s), the appropriate paragraph(s) shall be included:
i.The franchise agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law ( 11 U.S.C.A. Sec. 101 et seq.).
ii.The franchise agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
iii.The franchise agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
iv.The franchise agreement requires binding arbitration. The arbitration will occur at (indicate sites) with the costs being borne by (explanation). Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
v.The franchise agreement requires application of the laws of (indicate jurisdiction). This provision may not be enforceable under California law.
(6) Item 19: If any earnings claim is made, and the earnings claim figure(s) does (do) not include either costs of sales or operating expenses, then, in addition to the information required by Item 19, all offering circulars shall contain the following statement prominently set forth in Item 19 or set forth in a preface, exhibit or appendix, which is part of the offering circular. If the statement is set forth in a preface, exhibit or appendix, a reference to the preface, exhibit or appendix shall be prominently set forth in Item 19: "The earnings claims figure(s) does (do) not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your (franchised business). Franchisees or former franchisees, listed in the offering circular, may be one source of this information."

Cal. Code Regs. Tit. 10, § 310.114.1

Note: Authority cited: Section 31502, Corporations Code. Reference: Sections 31110,31111, 31114, 31119 and 31125, Corporations Code.

1. Repealer and new section filed 11-21-79; designated effective 1-1-80 (Register 79, No. 46). For prior history, see Registers 74, No. 52 and 74, No. 42.
2. Amendment of subsections (a) and (c) filed 7-17-81; effective thirtieth day thereafter (Register 81, No. 29).
3. Amendment filed 7-27-88; operative 8-26-88 (Register 88, No. 32).
4. Amendment filed 1-20-94; operative 2-21-94 (Register 94, No. 3).
5. Amendment of subsection (a) filed 4-6-94; operative 5-6-94 (Register 94, No. 14).
6. Amendment filed 6-10-2003; operative 7-10-2003 (Register 2003, No. 24).