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HomeCorporations Code§ 31011 Franchise Fee Definition Exclusions

§ 31011 Franchise Fee Definition Exclusions

Corporations Code·California
AI Summary·Official Text·Key Terms·Related Statutes·References
AI SummaryVerified

§ 31011 Franchise Fee Definition Exclusions

Key Takeaways

  • •A franchise fee is money you pay to start or run a business under a franchise agreement.
  • •Buying goods at a real wholesale price (without being forced to buy too much) is not a franchise fee.
  • •Paying a normal credit card service charge is not a franchise fee.
  • •Paying a trading stamp company for stamps given to customers is not a franchise fee.

Example

You open a fast-food restaurant under a big brand name.

The money you pay the brand to use their name and sell their food is a franchise fee. But if you buy ingredients at a fair wholesale price, that’s not a franchise fee.

AI-generated — May contain errors. Not legal advice. Always verify source.

Official Source
View on CA.gov

§ 31011 Franchise Fee Definition Exclusions

“Franchise fee” means 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. However, the following shall not be considered the payment of a franchise fee: (a) 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 reasonable businessperson normally would purchase by way of a starting inventory or supply or to maintain a going inventory or supply. (b) The payment of a reasonable service charge to the issuer of a credit card by an establishment accepting or honoring that credit card. (c) 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. (Amended by Stats. 2002, Ch. 664, Sec. 54. Effective January 1, 2003.)

Last verified: January 23, 2026

Key Terms

franchise feefranchiseesubfranchisorbona fide wholesale pricereasonable service chargetrading stamp company

Related Statutes

  • § 31005 Franchise Definition Requirements
  • § 31020 Franchise Broker Definition Exemptions
  • § 31102 Franchisee Resale Exemption
  • § 31001 Franchise Sale Disclosure Requirements
  • § 31006 Franchisee Definition

References

  • Official text at leginfo.legislature.ca.gov
  • California Legislature. Corporations Code. Section 31011.
View Official Source