Registration and Exemption Procedures Before the DFPI
California requires registration of franchise offers unless an exemption applies. The registration application includes the FDD/offering circular, audited financial statements, consent to service of process, and required fees, filed with the DFPI. The Commissioner may issue a permit, or deny/suspend/revoke registration, and may impose conditions.
Know the exemptions: the fractional franchise exemption (franchisee or spouse has prior experience in the same type of business); the leased department exemption; the petroleum dealer exemption; the single-unit and limited-offer exemptions; the out-of-state exemption; and the isolated-sale exemption. Exempt transactions still often require filing a notice and paying a fee, and the antifraud provisions always apply. A sale to an existing franchisee (renewal or extension of an existing franchise) may be exempt from registration.
Traps: assuming an exemption removes antifraud liability (it does not); assuming an exemption removes the need to deliver an FDD (many still require disclosure); confusing "exempt transaction" with "exempt franchise"; missing that a material change to the offering requires an amendment; and forgetting that the registration is state-specific-registration in another state does not satisfy California.
Rule of thumb: exemptions are narrow, fact-specific, and often require a notice filing. When in doubt, register.
Worked example: A franchisor with 3 California outlets sells a single unit to a buyer with 10 years of experience in that industry, and the buyer's spouse also has experience. The fractional franchise exemption may apply if the statutory conditions are met-but the franchisor must still comply with antifraud rules and verify the experience requirement, and should confirm whether a notice filing is required.