The Franchise Registration States
The Franchise Registration States are those states that, in addition to the Federal Franchise Rules, have passed additional franchise legislation and require franchisors to register their Franchise Disclosure Document (FDD) with a local state official before offering or selling a franchise within the state.
The Franchise Registration States are an important consideration for potential franchisees, as they offer additional legal protections and regulations around the sale and disclosure of a franchise.
The Franchise Registration States Are:
These States require registration and approval of Franchise Disclosure Document prior to selling in the state or from the state.
The Federal Trade Commission requires the Franchise Disclosure Document to be given to you at least 14 days before you sign any agreement. However, the responsibility for following this rule falls largely on the shoulders of the franchisor. There is no federal registration of the FDD so it's up to the franchisor to make sure they are compliant. But, as a way to protect consumers, several states have put in place rules to protect people who are thinking of buying a franchise. The states above require a franchise's FDD to be registered with a state government agency before operating there.
Franchise Filing States
In addition to the Franchise Registration requirements, certain jurisdictions (or filing states) have implemented additional franchise or business opportunity legislation that requires franchisors to submit a franchise filing with the state. In most situations, the filing is simply a notice to the state and, unlike the Franchise Registration States, it does not undergo or review the FDD. The following states are part of the Franchise Filing System.
For franchisors with a federally registered trademark, the Franchise Filing States include: Connecticut, Florida, Kentucky, Nebraska, North Carolina, South Carolina, South Dakota, Texas, and Utah. For franchisors without federally registered trademarks Georgia and Louisiana also require filings.
In addition to the previously mentioned states, Georgia and Louisiana also require filings from franchisors without federally registered trademarks.
It is highly recommended that you review the FDD with a franchise lawyer. Even if you have a franchise lawyer, it is a good idea to look over the FDD yourself and make a list of questions or concerns you want clarified. This will help you understand the document better and ask the right questions.
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The Federal Franchise Laws require franchisors to submit an FDD to prospective franchisees at least 14 days before the franchisee may sign a franchise agreement or pay any fees.
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