Charlotte, NC asked in Contracts for California

Q: Selling 1 franchise in CA for 60K. What is the surety bond amount? IL is cost x no. of franchisees. Is it same in CA?

California has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations. The Commissioner has imposed a fee deferral condition. I would rather establish a surety bond instead. Is that allowed as an alternative and how do they calculate the amount of the bond. In Illinois it is the franchisee fee times the amount sold. In our case it is only 1. Is California the same as Illinois?

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1 Lawyer Answer
Derek Allen Colvin
Derek Allen Colvin

A: Section 310.113.5 - Surety Bond in Lieu of Impound

In lieu of the imposition of an impound condition a franchiser may post a surety bond in such amount as shall be required by the Commissioner. Such bond shall be issued by a corporate surety admitted to transact business in the State of California, conditioned upon the completion by the franchiser of its obligations under the franchise contract to provide real estate, improvements, equipment, inventory, training or other items included in the offering. Where more than one franchise may at the same time be sold but unopened, the amount of the bond shall equal the aggregate liability to all such franchises in this state.

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