Starting a Franchise in California
Each state will have its own nuanced rules for setting up a franchise. So it’s important to look up the specific franchising rules for the state you’re in. In the state of California, if you are setting up a franchise you are required by Franchise Investment Law to register with your state government, specifically the California Department of Business Oversight, which handles the registration and renewal of franchises. To properly register a franchise, you must go through an involved process. This article will detail the steps required in this process.
Both registering and renewing a franchise have associated fees. It costs $650 to initially file a new franchise, like $450 to renew a registration. Along with fees, there is also an application process, which requires a cover letter to be written and submitted. The letter is meant to provide the details of the franchise, such as the applicant’s name, the fiscal year of application, and the Org-ID number. Both the registration application and corporate acknowledgment are to be signed by a general partner, or another representative of the franchise.
The application must also include:
- Sales agent disclosure forms from the person selling the franchise
- Customer authorization of the disclosure of financial records
- State addendum
- Internet ad exemption notice
- Audited financial statements signed by an accountant
- Franchise disclosure document
- Uniform consent to service of process
- Supplemental information
- Guarantee of performance
Once you have your application together and submit it, a lawyer will be assigned to your application and respond with notes and questions. Depending on the completion of the initial application and the review of the lawyer, the application will then be examined by the California Department of Business Oversight, who will issue a letter to the applicant within 30 days. When the application is deemed complete, the applicant will finally be granted an Order of Effectiveness, finalizing the registration. Once registered, a franchise must be renewed every year.