California Bar Journal
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Self-Assessment Test
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Answer the following questions after reading the MCLE article on franchise law. Use the answer form provided to send the test, along with a $20 processing fee, to the State Bar. If you do not receive your certificate within four weeks, call Ibrahim Bah at 415/538-2028.

1. Today, every state in the nation has its own law regulating offers and sales of franchises.

2. Before a franchisor can sell a franchise, the franchisee is entitled to a three-day cooling off period.

3. When one company provides another with a marketing plan for selling goods or services, in substantial association with the licensor's trademark, all in exchange for a fee, the relationship is a franchise.

4. Assistance in the form of training, guidance about management, marketing and personnel, the grant of an exclusive territory, restrictions on operating hours, all may indicate the presence of a marketing plan.

5. An agreement that imposes procedures or techniques that are customarily observed in the particular business is not a marketing plan for purposes of the franchise law.

6. It is possible for a company to be deemed to have operated in substantial association with a franchisor's trademark, even if the trademark is not presented to customers.

7. Royalties, rents, payments for training, advertising or supplies, or the wholesale purchase of inventory for resale at bona fide wholesale prices, are all examples of charges that may be a franchise fee.

8. Under the FTC franchise rule, the franchise fee element is satisfied by required payments from the franchisee to the franchisor totaling $500 or more up until the time the franchisee has operated the business for six months.

9. Franchisors selling a franchise in a state that has its own franchise law must comply with both the federal and state franchise laws.

10. Before a franchisor can offer or sell a franchise, the franchise must be registered with the Federal Trade Commission.

11. Franchise laws seek to provide pre-sale disclosure to prospective franchisees so they can make informed decisions about whether to invest.

12. The presale disclosures that a franchisor must make are limited to the franchisor's history, the background of its officers and how much money a franchisee can make.

13. California requires franchisors to register with the state before making any offer or sale of a franchise in this state.

14. After registering with the state once, a franchisor may offer and sell franchises perpetually, for as long as it continues to act as a franchisor.

15. All franchisors who offer or sell franchises in the state must register regardless of their size or experience.

16. California's franchise laws apply during the sale process and also at the termination or nonrenewal of a franchisee.

17. The Franchise Relations Act gives heirs of a deceased franchisee an opportunity to participate in ownership of a franchise.

18. Referring to a business relationship as a "license" avoids the need to comply with the franchise laws.

19. It is not necessary to comply with the franchise investment law or franchise relations act if the franchisee signs a knowing waiver of the law before a notary public.

20. There is no private right of action against a franchisor for violating the FTC Franchise Rule.