The offer and sale of a franchise requires compliance with federal and state franchise laws. While Federal Law provides an overriding franchise regulation framework, fifteen states have enacted their own franchise laws that supplement and add additional regulations to be followed by franchisors. Thirteen of the states, known as the “franchise registration states,” require the registration of the franchisor’s Franchise Disclosure Document (FDD).
To learn more about each of these franchise registration states, the state regulator in charge of FDD registrations, and the steps to follow to register your FDD, visit our interactive franchise registration map.
In these states, in addition to complying with the Federal Franchise Rule, franchisors must file and register their franchise disclosure document (FDD) prior to offering or selling a franchise. Like a stock or security that must be registered with the Securities and Exchange Commission before offering or selling a franchise in these “registration states,” your FDD must first be registered with the appointed state regulator. For example, in New York, FDDs must be registered with the New York Attorney General. In California, FDDs must be registered with the California Department of Business Oversight. Since New Jersey is not registration state, although FDDs are still required and must be disclosed, they are not registered with a state entity.
In these states there are supplemental regulations (in addition to the federal regulations that apply throughout the entire United States) that must be followed. Although Michigan and Oregon do not require “registration” of a franchisor’s FDD, these states require the filing of a notice with each respective state advising of your proposed offer and sale of franchise.
Always remember that the “state” regulations are a supplement to the Federal Rule and that, at all times prior to offering and selling a franchise, you must have a prepared and updated FDD. Your FDD must be disclosed and delivered to your prospective franchisee at least 14 calendar days before the prospective franchisee (i) signs a binding agreement with you, or (ii) makes any payment to you or any affiliated entity or person. To learn more about the franchise registration states, visit our interactive Franchise Registration States Map.
Category: Start a Franchise
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