§ 31126
519 words·~2 min read·
/ca/corporations-code/31126A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(a)A prospective franchisee seeking to buy an existing franchise, all or substantially all of the assets of an existing franchise business, or an interest in an existing franchise business shall do all of the following when applying with the franchisor to buy that franchise, those assets, or that interest:
(1)Provide their name and address to the franchisor.
(2)Provide to the franchisor a copy of all agreements related to the sale, assignment, or transfer of the franchise, the assets of the franchise business, or the interest in the franchise business.
(3)Provide an application to the franchisor for approval of the transfer, which shall include all forms, financial disclosures, and related information required by the franchisor in reviewing prospective franchisees.
(1)If a form or document required to be submitted with an application pursuant to paragraph
(3)of subdivision
(a)is not reasonably available to the prospective franchisee, the prospective franchisee may make a written request for the form or document to the franchisor, and the franchisor shall deliver the form or document to the prospective franchisee by email, courier, or certified mail within 15 calendar days of receiving the request.
(2)If the franchisor’s then-existing standards for approval of an application required by paragraph
(3)of subdivision
(a)are not reasonably available to the prospective franchisee, the prospective franchisee may make a written request for the standards to the franchisor, and the franchisor shall communicate the standards to the prospective franchisee within 15 calendar days of receiving the request.
(c)As soon as practicable after receiving the application required by paragraph
(3)of subdivision (a), the franchisor shall notify the prospective franchisee in writing of any additional information or documentation necessary to complete the application.
(1)The franchisor shall notify the prospective franchisee of the approval or disapproval of their application within 60 days after receiving the information and documentation required by subdivision
(a)and requested by the franchisor pursuant to subdivision (c). The notice shall be in writing and shall be delivered to the prospective franchisee by email, courier, or certified mail. If the application is disapproved, the franchisor shall include in the notice a statement setting forth the reasons for the disapproval.
(2)In any legal action in which the franchisor’s disapproval of a sale, assignment, or transfer pursuant to this subdivision is an issue, the reasonableness of the franchisor’s decision shall be a question of fact requiring consideration of all relevant circumstances. However, nothing in this paragraph shall prohibit summary judgment when the reasonableness of the disapproval can be decided as a matter of law.
(e)This section neither prohibits a franchisor from exercising nor requires a franchisor to exercise a contractual right of first refusal to purchase an existing franchise, all or substantially all of the assets of an existing franchise business, or an interest in an existing franchise business.
(f)This section shall not be interpreted to prevent the franchisor, in connection with a proposed sale under subdivision (a), from requiring that the prospective franchisee and the prospective seller comply with the transfer conditions specified in the franchise agreement.