Virginia Franchise Law and FDD Registration

Virginia Franchise Law

Virginia is a franchise registration state. Before offering or selling a franchise in Virginia franchisors must register and file their FDD with the Virginia State Corporation Commission. Virginia’s franchise law, known as the Virginia Retail Franchising Act, Section 13.1-557, et. seq. of the Code of Virginia, regulates the registration, offer, and sale of franchises within the state and regulates the relationship between franchisor and franchisee. The Securities and Retail Franchising Division of Virginia's State Corporation Commission oversees the implementation and enforcement of Virginia’s franchise laws.

Virginia Franchise and FDD Registration FAQ’s

Who Regulates Franchises in Virginia?

The Division of Securities and Retail Franchising of the Virginia Corporation Commission regulates and oversees enforcement of Virginia’s Retail Franchising Act.

Where are Virginia FDD Registration and Renewal Applications Filed?

Applications for initial FDD registration, annual renewals, and amendments are filed at:

Division of Securities and Retail Franchising
Tyler Building - 9th Floor
1300 E. Main Street
Richmond, VA 23219

The telephone number for the division is (804) 371-9051.

What Should I Include with My Virginia Franchise Registration Application?

The franchise registration application should include:

• Registration fee of $500 for initial franchise registrations or $250 for renewal franchise registrations plus electronic filing fee of $100 per filing;

• Uniform Franchise Registration Application with Certification Form;

• Franchisor's Cost and Source of Funds Form;

• Uniform Consent to Service of Process Form;

• Virginia Affidavit of Compliance;

• Guarantee of performance;

• Auditor’s Consent;

• Corporate acknowledgment;

• FDD comprised of one clean copy and, for renewals, also one marked copy with an electronic version in searchable pdf format on CD;

• Sales Agent Disclosure Form; and

• A transmittal letter summarizing the contents of the application and containing a representation that the electronic version of the transmitted documents, including the FDD, is identical to the print paper versions.

To learn more about Virginia FDD registration and franchise law, call us at (800) 976-4904 or contact us.

What Financial Statements Are Required for Virginia FDD Registration?

Virginia requires audited financial statements and does not recognize or allow start-up franchisors to use an unaudited opening balance sheet. Virginia does not recognize or permit the phase-in of audited financial statements. For start-up franchisors new to franchising and within their first year of offering franchises, the initial FDD and registration application must include an audited opening balance sheet. Thereafter, annual renewal requires the inclusion of three years of audited financial statements comprised of "statement of operations (profit and loss statements)", "statement of stockholders equity", and "statement of cash flows".

Additionally, if the date of the most recent audited financial statements included in your FDD is, as measured from the date that you file your registration application, more than 120 days old, then you must supplement your FDD to shall also include the following financial statements prepared in accordance with generally accepted accounting principles:

• An unaudited interim balance sheet as of a date within 120 days of the date of the application; and

• An unaudited statement of income or operations for the period from the most recent audited financial statements to the date of the interim balance sheet.

Does Virginia Impose Financial Assurance Requirements?

Yes. During Virginia FDD registration and renewal the state examiner will review the financial statements of your franchise company to determine if your company is solvent. If the state examiner determines that your franchise company is either "insolvent" or "in danger of becoming insolvent" then the state state examiner may either refuse registration under Section 13.1-562 of the Retail Franchising Act or condition registration on the imposition and your satisfaction of a financial assurance requirement. Under Virginia's administrative code a financial assurance requirement will be comprised of either an agreement to defer receipt of the initial franchise fee for each franchise sold in Virginia until you have satisfied your "pre-opening obligations under the franchise agreement" or the escrow of the initial franchise fee with an approved Virginia bank.

When Must I Renew My Virginia FDD Registration?

Virginia FDD registration must be renewed 30 days prior to the one year anniversary of your registration date. However, this does not negate your obligation to update your FDD on an annual basis within 120 days of the end of your fiscal year. In such instances if your 120 day annual renewal period is out of sync with your Virginia registration / renewal date, i.e., your Virginia registration has not yet expired, you may file a FDD registration amendment application.