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What Is A Franchise Fee Under California Law?

A franchise fee according to the California Franchise Investment Law 31011 is any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a franchise agreement, including, but not limited to, any payment for goods and services. According to the California Franchise Investment Law the following is not considered the payment of a franchise fee:

  • The purchase or agreement to purchase goods at a bona fide wholesale price if no obligation is imposed upon the purchaser to purchase or pay for a quantity of the goods in excess of that which a starting inventory or supply or to maintain a going inventory or supply.
  • The payment of a reasonable service charge to the issuer of a credit card by an establishment accepting or honoring that credit card.
  • Amounts paid to a trading stamp company under Chapter 3 (commencing with Section 17750) of Part 3 of Division 7 of the Business and Professions Code by a person issuing trading stamps in connection with the retail sale of merchandise or service. Learn more about California’s franchise laws and registration requirements.

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