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Franchise Law

To franchise your business, including offering and selling franchises or terminating existing franchisees, you must comply with state and federal laws governing franchising. Franchising is regulated at both the state and federal level in some states, and only at the federal level in others.

Registration & Disclosure Requirements

A franchisor must provide the prospective franchisee a Franchise Disclosure Document together with copies of all agreements (an FDD) before it can offer or sell a franchise. Some states also require that the franchise offering be registered and approved by the state before the franchisor can offer or sell a franchise in that state.

Federal Law

The offer and sale of franchises is governed by federal franchise laws that require the franchisor to provide to prospective franchisees an FDD at least 14 calendar days before the prospective franchisee signs any agreement or pays any consideration. This applies in all 50 states.

Overview

State Laws

The offer and sale of franchises is also governed by state laws that require the franchise offering first be registered and approved by the state before marketing for franchisees in those states and before the FDD can be provided to prospective franchisees.

14 state franchise registration states (blue) and 5 business opportunity states (green) require registration, and 7 additional business opportunity states (orange) also require registration unless the franchisor has a federally registered trademark.

State Law

Non-Registration States

An FDD will allow the franchisor to offer and sell franchises in 24 states (which do not have state franchise laws or state business opportunity laws) without any registration or filing fees.

An FDD must be provided to prospective franchisees.

State laws

Franchise Registration States

14 states have franchise laws that require the franchise offering first be registered and approved by the state before offering or selling franchises in those states.

Registration with the state and filing fees required.

An FDD must be provided to prospective franchisees.

State laws

Business Opportunity States

5 states have business opportunity laws that require a simple notice of exemption filing before offering or selling franchises in those states.

Registration with the state and filing fees required.

An FDD must be provided to prospective franchisees.

State Laws

Business Opportunity States

7 states have business opportunity laws that require a modified FDD and registration before offering or selling franchises in those states.

Registration with the state and filing fees required. However, if the franchisor has a federally registered trademark, then no registration or filing fees required in these states.

An FDD must be provided to prospective franchisees.

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What is an FDD?

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What is required by state registration?

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Do I need to register advertisements I use to offer or sell franchises?

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Do I need to provide (disclose) the FDD to a prospective franchisee?

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Do I need to periodically renew or update my registration or FDD?

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Learn More

Relationship Restrictions

Some states also have relationship laws which govern the relationship between the franchisor and existing franchisees. These relationship laws vary state by state, but usually regulate whether the franchisor can make changes to the franchise system during the term of a Franchise Agreement and whether the franchisor can terminate a franchisee for breaches of the Franchise Agreement (and whether the franchisor must give the franchisee a “cure period” to try and correct the breach).

Defaults & Termination Franchise Litigation