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What are the legal requirements for starting a franchise business in California?

Picture of Chris Battis By   ·  1 minute read

The legal requirements for starting a franchise business in California can be complex and involve various state and federal laws. Below are some key legal requirements to consider:

  1. Franchise Disclosure Document: Under California law, franchisors are required to provide a Franchise Disclosure Document (FDD) to potential franchisees at least 14 days before the franchisee signs any agreement or pays any money. The FDD must comply with both California and federal laws and provide detailed information about the franchise, including financial statements, franchise fees, initial and ongoing costs, and other key information.
  2. Franchise Agreement: Once the FDD has been provided to the potential franchisee, the franchisor must also provide a franchise agreement that complies with California law. The franchise agreement should detail the rights and obligations of both parties, including franchisor support, advertising requirements, and termination provisions.
  3. California Franchise Investment Law: Franchisors who wish to sell franchises in California must also comply with the state's Franchise Investment Law (CFIL). The law requires franchisors to register their FDD with the California Department of Business Oversight and provide ongoing disclosures to franchisees.
  4. Business Licenses and Permits: Before starting any business in California, including a franchise, the business owner must obtain any required business licenses and permits from state and local government agencies. These may include a resale permit, zoning permits, and state and federal tax identification numbers.
  5. Compliance with Labor Laws: Franchisors and franchisees must also comply with California's labor laws, which are among the most extensive in the country. This includes paying minimum wage, providing meal and rest breaks, and complying with fair hiring and termination practices.

It is important to note that the above information is only a general overview and that requirements for starting a franchise business in California can vary depending on the specific circumstances. It is recommended that anyone considering starting a franchise in California seek the advice of an experienced franchise attorney.