State of California Department of Corporations
Anthony R. Pierno, Commissioner
In reply refer to: File No. _____
This interpretive opinion is issued by the Commissioner of Corporations pursuant to section 31510 of the franchise investment law. It is applicable only to the transaction identified in the request therefor, and may not be relied upon in connection with any other transaction.
Mr. Jay Erens
Attorney at Law
Levy and Erens
208 South LaSalle Street
Chicago, IL 60604
Dear Mr. Erens:
The request for an interpretive opinion contained in your letter dated April 22, 1971, has been considered by the Commissioner. Your letter raises the question whether the offer and sale of franchises in the State of-California by Midas International Corporation, a Delaware corporation ("Midas"), is exempt from the registration requirement of Section 31110 of the Franchise Investment Law by virtue of Section 31101 of that Law.
Section 31101 exempts from the disclosure and registration requirement of Section 31110 the offer and sale of a franchise, if the standard as to financial condition set forth in subdivision (a) and the standard as to scope of operations set forth in subdivision (b) are met, and if, moreover, the disclosures required by subdivision (c) are made.
The financial statement of Midas as at December 31, 1970 submitted to us, which we assume to be its most recent audited financial statement, indicates a net worth in excess of $5,000,000. You have represented that Midas at all times during the last five years has had well in excess of 25 franchisees and now has 620 operating franchises which figure is subject to change. On the basis of. these figures, Midas meets the standards set forth in subdivisions (a) and (b) of Section 31101.
Subdivision (c) of Section 31101 calls for the disclosure of certain factual information in writing to each prospective franchisee at least 48 hours prior to the execution by these prospective franchisees of any binding franchise or other agreement, or at least 48 hours prior to the receipt of any consideration. The question whether the printed information submitted with your request is complete and accurate, so as to meet the requirements of items (l) through (14) of subdivision (c), calls for a factual determination. This question, is not a proper subject for an interpretive opinion, under Sections 31510, 31511, Corp. Code, and therefore has not been considered herein.
Only on the assumption that complete and accurate disclosures are made, as required in subdivision (c), we are of the opinion that the offer and sale of franchises by Midas in California is exempt from the registration requirement of Section 31110 by virtue of Section 31101, if, and as long as the facts represented by you and reflected above as the basis for the application of subdivisions (a) and (b) of that Section, remain accurate and pertinent.
Dated: San Francisco California
June 21, 1971
By order of
ANTHONY R. PIERNO
Commissioner of Corporations
HANS A. MATTES
Office of Policy