Legal Question in Business Law in California

Can we expect full reimbursement for fees paid for a franchise that was never finalized? We requested to be released from our agreement when we discovered the operation was nothing like the projected model, franchise support was lacking and the product (a coffee bike (cart)) was defective. The defective inverter on the bike (reported 2 weeks into operation) was never replaced as promised & this led to closure by the health dept. The franchisor is offering only $17500 back for our $22,000 in payments plus now requesting this be paid back over 15 months with a non-disclosure/competitive/disparagement signature from us. This is not what we agreed to verbally and amicably. Despite several requests from me, the franchisor did not have me sign anything but a franchise deposit fee. We now know this is because he did not have a valid California franchise license in place at time of begin of operation. We hope this is to our advantage since we are not happy with their offer and would like to know our legal stand in this issue. Thank you


Asked on 10/31/11, 11:46 am

3 Answers from Attorneys
Anthony Roach Law Office of Anthony A. Roach

Franchises in California are regulated by the Franchise Investment Law. California Corporations Code section 31110 provides it is unlawful �to offer or sell any franchise in this state unless the offer of the franchise has been registered ... or exempted.� An offer or sale is made �in� California where �an offer to sell is made in this state, or an offer to buy is accepted in this state.� (Corp.Code � 31013.)

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Answered on 10/31/11, 11:52 am
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Assuming that the franchise offering WAS registered or exempted, your claim and the offer being made seem pretty close, further assuming the franchisor is not about to go bankrupt, making it uneconomic to file suit. Therefore, my inclination would be to accept the settlement offer. There is a franchise attorney who often answers questions on LawGuru (although I haven't seen any recently) - you might want to look him up: Kevin Murphy, in San Francisco.

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Answered on 10/31/11, 1:30 pm
Shawn Jackson The Jackson Law Firm, P.C.

It sounds like we need to arrange a conference call to bring in a third party attorney mediator who will offer some "free time" to see if a simple common sense approach is in the best interest of everyone. Although you can certainly escalate the process by various "saber rattling", often times a reality based conversation with an experienced attorney mediator with over 25 years of business ownership experience may seem the best alternative.

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Shawn Jackson ESQ. (707) 584-4529

Business Development Attorney EMAIL: [email protected]

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Answered on 11/01/11, 4:10 pm


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