California Real Estate Practice Exam

It is unlawful for any person to affect the sale of any franchise that is regulated by the Franchise Investment Law, unless such person has made an application to the Corporation Commissioner, and is licensed by the:

1. Corporation Commissioner.

2. Franchise Tax Board.

3. Real Estate Commissioner.

4. Real Estate Commissioner or Corporation Commissioner.

The correct answer is: Real Estate Commissioner or Corporation Commissioner.

The statement is accurate because the Franchise Investment Law requires that individuals involved in the sale of franchises must be properly licensed to ensure regulatory compliance and consumer protection. Specifically, they need to be licensed by either the Real Estate Commissioner or the Corporation Commissioner. This dual licensing framework allows for flexibility in compliance and ensures that those selling franchises possess the necessary qualifications and knowledge of the statutes that protect franchisees in California. Licensing by the Real Estate Commissioner particularly pertains to individuals who may deal with franchise investments that overlap with real estate, whereas the Corporation Commissioner oversees a broader range of business activities, including franchises that may not have a direct real estate component. The combination of these licensing authorities reflects the multifaceted nature of franchise operations, ensuring that both real estate and general business laws are adhered to. This means that individuals looking to engage in franchise sales must seek approval from one of these commissions depending on the specific nature of their business activities, thereby reinforcing the legal framework designed to protect both the franchisors and franchisees.