California Code, Corporations Code - CORP § 31005

(a) “Franchise” means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:

(1) A franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor;  and

(2) The operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate;  and

(3) The franchisee is required to pay, directly or indirectly, a franchise fee.

(b) For the purposes of this division, the term “franchise” also means the following:

(1) Any contractual agreement between a petroleum corporation or distributor and a gasoline dealer, or between a petroleum corporation and distributor, under which the petroleum distributor or the gasoline dealer is granted the right to use a trademark, trade name, service mark, or other identifying symbol or name owned by the other party to the agreement, or any agreement between a petroleum corporation or distributor and a gasoline dealer, or between a petroleum corporation and distributor, under which the petroleum distributor or the gasoline dealer is granted the right to occupy premises owned, leased, or controlled by the other party to the agreement, for the purposes of engaging in the retail sale of petroleum and other products of the other party to the agreement.

(2) Any contract between a refiner and a petroleum distributor, between a refiner and a petroleum retailer, between a petroleum distributor and another petroleum distributor, or between a petroleum distributor and a petroleum retailer, under which a refiner or petroleum distributor authorizes or permits a petroleum retailer or petroleum distributor to use, in connection with the sale, consignment, or distribution of gasoline, diesel, gasohol, or aviation fuel, a trademark which is owned or controlled by such refiner or by a refiner which supplies fuel to the petroleum distributor which authorizes or permits such use.  The term “franchise” as defined in this paragraph includes the following:

(A) Any contract under which a petroleum retailer or petroleum distributor is authorized or permitted to occupy leased marketing premises, which premises are to be employed in connection with the sale, consignment, or distribution of fuel under a trademark which is owned or controlled by such refiner or by a refiner which supplies fuel to the petroleum distributor which authorizes or permits such occupancy.

(B) Any contract pertaining to the supply of fuel which is to be sold, consigned, or distributed under a trademark owned or controlled by a refiner, or under a contract which has existed continuously since May 15, 1973, and pursuant to which, on May 15, 1973, fuel was sold, consigned, or distributed under a trademark owned and controlled on such date by a refiner.

(C) The unexpired portion of any franchise, as defined by the preceding provisions of this subdivision, which is transferred or assigned as authorized by the provisions of such franchise or by any applicable provision of state law which permits such transfer or assignment without regard to any provision of the franchise.

(c) For purposes of this division, the term “franchise” does not include a nonprofit organization operated on a cooperative basis by and for independent retailers which wholesales goods and services primarily to its member retailers and to which all of the following is applicable:

(1) Control and ownership of each member is substantially equal.

(2) Membership is limited to those who will avail themselves of the services furnished by the organization.

(3) Transfer of ownership is prohibited or limited.

(4) Capital investment receives no return.

(5) Substantially equal benefits pass to the members on the basis of patronage of the organization.

(6) Members are not personally liable for obligations of the organization in the absence of a direct undertaking or authorization by them.

(7) Services of the organization are furnished primarily for the use of the members.

(8) Each member and prospective member is provided with an offering circular which complies with the specifications of Section 31111 .

(9) No part of the receipts, income, or profit of the organization is paid to any profitmaking entity, except for arms-length payments for necessary goods and services, and members are not required to purchase goods or services from any designated profitmaking entity.

(d) The nonprofit organization is subject to an action for rescission or damages under Section 3343.7 of the Civil Code if the organization fraudulently induced the plaintiff to join the organization.


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