State business opportunity laws often apply to franchisors. 26 states have business opportunity laws. Unless the franchise is exempt for some specific reason, the franchisor must comply with the state business opportunity laws.

Failure to comply with state business opportunity laws is a rookie mistake that can create a lot of liability for a franchise system. Failure to comply with the business opportunity laws can mean that the franchisor must rescind the franchise agreement, pay fines and/or damages. Some states even have criminal penalties for failure to comply with business opportunity laws.

Many states exempt a franchise from their business opportunity laws if they comply with the FTC Franchise Rule, however, some states require a filing of a notice of exemption. Franchisors must do an initial exemption filing in Connecticut, Kentucky, Nebraska, and Texas. However, in Florida and Utah the franchisor must annually file an exemption from the business opportunity laws.

Another common way that franchises are exempt from state business opportunity laws is by having a registered trademark. If the franchisor does not have a registered trademark, they must comply with the business opportunity laws in the state. Connecticut, Georgia, Louisiana, Maine, North Carolina and South Carolina exempt franchises that have a registered mark. Some of these states require a federally registered mark, but others may accept a state registered trademark.