Nobody wants to wait in line…especially when you’ve worked hard and paid a lot of money just to get to the entrance. Disneyland first introduced the FastPass in 1999. This pass lets them skip the long lines for popular rides. It’s a win-win because FastPass frees guests to enjoy their time—and spend more money—elsewhere in the park.

In California, the process to register a new franchise offering might feel like waiting in a never-ending line for a ride at Disneyland. Even after investing the time and money to get your FDD ready, it can take up to four months to be approved to start offering and selling franchises in California.

Luckily, there are several exemptions from registration in California that might allow you to skip the line and “FastPass” your way to selling immediately.

Here are a few of the common California franchise exemptions:

  • Large Franchisee

  • Experienced Franchisee

  • Fractional Franchise

  • Out-of-State Sales

Large Franchisee Exemption

If every purchaser of the franchise meets at least one of the following categories and has knowledge and experience in financial and business matters, you may be exempt from both California’s registration and disclosure laws:

  • A natural person with over $300,000 in gross income per year in each of the previous two years with reasonable expectations to reach that level during the current year. The purchaser may include his or her spouse’s gross income, but the joint gross income must exceed $500,000;

  • A natural person with a net worth (combined with spouse) of more than $1,000,000 excluding home, home furnishings, retirement assets, and vehicles; or

  • An entity with total assets over $5,000,000 according to its most recent financial statement (prepared in accordance with U.S. GAAP).

You must file a notice of exemption and pay a filing fee before using the exemption.

Experienced Franchisee Exemption

Sales or transfers to an entity that is owned by an experienced franchisee who meets all of the following requirements may be exempt from both California’s registration and disclosure laws:

  • Experienced franchisee owns at least a 50% interest in the entity;

  • Experienced franchisee has at least twenty-four months’ experience being responsible for the financial and operational aspects of a business offering products or services substantially similar to those offered by the franchised business;

  • The experience must have occurred within seven years of the date of the sale;

  • The experienced franchisee may not be controlled by the franchisor.

You must file a notice of exemption and pay a filing fee before using the exemption.

Fractional Franchisee Exemption

The fractional franchise exemption’s purpose is to allow an existing business to add new, similar products or services. If all of the following requirements are met you may be exempt from both California’s registration and disclosure laws:

  • For individuals, the franchisee must have been engaged in a business offering substantially similar or related products or services for at least twenty-four months immediately before the sale of the franchise;

  • For entities, an existing officer, a director, or a managing agent of the franchisee must have the necessary experience, and must have been in the current position for at least the last twenty-four months;
  • The new product or service must be substantially similar or related to the product or service being offered by the franchisee in its existing business;
  • The franchised business must be operated from the same location as the franchisee’s existing business; and
  • At the time the franchise is granted, the parties must anticipate that sales from the franchised business will not be greater than 20% of the total sales of the franchisee on an annual basis.

You must file a notice of exemption and pay a filing fee before using the exemption.

Out-of-State Sales Exemption

California exempts franchise sales where:

  • the franchise purchaser is a resident of another state or a foreign country; and

  • all locations from which transactions between the franchised business and its customers are made, or goods or services are distributed, are physically located outside the state.

The out-of-state exemption does not require a filing.

Don’t wait in line unless you have to.