Corporations Code section 31106
(a)
Any of the following conditions apply:(1)
One or more of the owners of the prospective franchisee owning at least a 50 percent interest in the prospective franchisee meet both of the following:(A)
The owner or owners have had, within the seven years before the date of the sale or other transaction, at least 24 months’ experience being responsible for the financial and operational aspects of a business offering products or services substantially similar to those offered by the franchised business.(B)
The owner or owners are not controlled by the franchisor.(2)
One or more of the owners of the prospective franchisee owning at least a 50 percent interest in the prospective franchisee meet both of the following:(A)
The owner or owners are, or have been within 60 days prior to the sale or other transaction, an officer, director, managing agent, or an owner of at least a 25 percent interest in the franchisor for at least 24 months.(B)
The owner or owners are not controlled by the franchisor.(3)
The offer, sale, or other transfer is of an additional franchise to an existing franchisee of the franchisor, or to an entity, one or more of the officers, directors, managing agents or owners of at least a 25 percent interest of which is an existing franchisee of the franchisor; provided that, in either case, for 24 months or more the franchisee, or the qualifying person, has been engaged in a business offering products or services substantially similar to those to be offered by the franchise being sold, or otherwise transferred.(b)
The franchisor files with the commissioner a notice of exemption and pays the fee prescribed in subdivision (f) of Section 31500 no later than 15 calendar days after the sale of a franchise in this state pursuant to this section.
Source:
Section 31106, https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CORP§ionNum=31106. (updated Jan. 1, 1997; accessed Jun. 25, 2025).
