Franchise laws by state vary to a great extent.
There are federal requirements that all franchisors must follow. However, most states have implemented their own rules.
These requirements primarily fall into three main categories:
- Franchise Registration Laws: State franchise registration laws expand on the federal disclosure rule by requiring a franchisor to also register their franchise disclosure document (FDD) with their state regulator and obtain government approval before they can operate their franchise.
- Franchise Filing Laws: Franchise filing laws require a franchisor to file or provide notice of their FDD to the state.
- Franchise Relationship Laws: Franchise relationship laws regulate the franchisor and franchisee relationship according to their contract agreement terms.
Understanding the franchise laws for each state is key to ensuring that you are in compliance and are aware of all the protections state law may provide to you.
Franchise Registration States
Franchise registration laws are applied by state based on whether a franchisor has a federally registered trademark. Franchisors in the below states must follow their state’s registration requirements before beginning the franchise term.
Registration states for franchisors with registered trademark include:
- California
- Hawaii
- Illinois
- Indiana
- Maryland
- Michigan
- Minnesota
- New York
- North Dakota
- Rhode Island
- Virginia
- Washington
- Wisconsin
Registration states for franchisors without registered trademark include:
- Connecticut
- South Carolina
- North Carolina
Franchisors must renew their registration filing annually to remain in compliance. Renewal terms vary by state, but the expiration date is usually provided in the registration approval letter. Ensure that you do not miss your renewal date!
Filing States
The state filing process differs from registration because a franchisor is only required to file their FDD with the government and pay the required fee. They are not required to obtain government approval to operate their franchise in the state.
Filing laws are also applied by state, based on a franchisor’s registered trademark.
Filing states for franchisors with registered trademark include:
- Connecticut
- Florida
- Kentucky
- Nebraska
- North Carolina
- South Carolina
- South Dakota
- Texas
- Utah
Filing states for franchisors without registered trademark include:
- Georgia
- Louisiana
- Maine
Relationship States
The below states have franchise relationship laws in place. These laws provide franchisees with increased protection, particularly within the contract’s termination and renewal clauses.
The franchise relationship states are:
- Alaska
- Arkansas
- California
- Connecticut
- Delaware
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Maryland
- Michigan
- Minnesota
- Mississippi
- Nebraska
- New Jersey
- North Dakota
- Rhode Island
- South Dakota
- Virginia
- Washington
- Wisconsin
If you are a prospective franchisee deciding where to buy a franchise, a relationship state would be a beneficial jurisdiction for you.
State Franchise Laws Are Complex
State franchise laws can get complicated. Some registration states have specific FDD filing requirements that must be met for approval, whereas some states have distinct industry rules and business opportunity requirements.
The Franchise & Business Law Group are experts on state franchising requirements, and we can help you to expand your business successfully.
Contact us today to discuss your franchising needs!