Large Franchisor Exemptions
Certain state franchise laws (but not the FTC Rule) provide exemptions from registration based on a franchisor’s high net worth and/or operational experience. The rationale is that franchisors with these qualifications have not historically been responsible for severe franchise sales violations and will have the financial resources and permanence to be held accountable if a sales violation is later alleged. The states that offer this exemption include California, Illinois, Indiana, Maryland, New York, North Dakota, Rhode Island, Washington and Virginia.
To qualify for a large franchisor exemption, the franchisor (or its parent) must meet certain minimum net-worth and/or experience requirements. For exemption purposes, a parent is generally defined as a company that owns at least 80 percent of the franchisor.
The net worth requirement varies from state to state:
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$5 million in California, Illinois, Indiana, New York, Washington
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$10 million in Maryland, North Dakota, Rhode Island
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$15 million in Virginia (and Illinois and New York also have a $15 million “super large” franchisor exemption)
Net worth must be evidenced by audited financial statements. The exemptions also permit a franchisor to rely on its parent company’s financial statements, provided the franchisor has a minimum net worth of $1 million ($3 million is required for New York’s super large exemption). It is important to note that in certain circumstances, if the franchisor relies upon its parent’s audited financial statements for the exemption, the parent must unconditionally guarantee the franchisor’s obligations to its franchisees.
Each state (other than New York and Illinois for its super-large franchisor exemption) includes a minimum experience requirement for its large franchisor exemption. A franchisor must have a minimum number of years of experience with the business being offered as a franchise, although some states permit a franchisor to rely on its parent’s experience. The experience requirement varies from state to state, but typically requires the franchisor to have at least 25 franchised units in operation during the previous five years, although some states permit the franchisor’s (or its parents’) operations to satisfy some or all of the required experience during the relevant period.
While the “large franchisor” exemption may be applicable to certain franchisors, certain limitations do apply. Most importantly, the FTC Rule does not provide a similar exemption, so disclosure is still required under the FTC Rule even if a state exemption is allowed.
Outline of State Franchise Disclosure and Registration Laws
Alabama
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Alaska
No franchise registration law is enacted. No franchise registration is required.
Business opportunity registration law is enacted. No business opportunity registration is required.
Arizona
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Arkansas
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
California
Franchise registration law is enacted. Registration is required, with a recommended filing time of 90 days. The registration fee is $675. The registration requirements include filing a Franchise Disclosure Document (FDD) with California Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
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Authorization of Disclosure of Financial Records
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Notice of Exemption for Interstate Advertisements (if you have a web site)
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Advertising or promotional materials directed to prospective franchisees
These documents must also be included as PDFs on a CD-ROM. Future advertising materials must be filed 3 days before use.
Business opportunity law is enacted. Contracts for Seller-Assisted Marketing Plan Act provides an exemption for franchisors who are effectively registered under the franchise registration law.
Colorado
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Connecticut
No franchise registration law is enacted. No franchise registration is required. Must file a copy of the federal trademark registration and license agreement, if the trademark is owned by third party.
Business opportunity law is enacted. Business opportunity law provides exemption from registration for franchisors that have a federally registered trademark. If you do not have a federally registered trademark, you must file your FDD with the state along with Connecticut’s CT BOIA-1 Application to Register a Business Opportunity Investment. The filing fee is $400.
Delaware
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
District of Columbia
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Florida
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors who have a federally or state registered trademark. A safe-harbor exemption for franchisors is obtained by filing a Notice of Exemption and payment of a $100 fee.
Georgia
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors who have a federally or state registered trademark.
Hawaii
Franchise registration law is enacted. Registration is required, with a recommended filing time of 30 business days. The registration fee is $50. The registration requirements include filing:
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Uniform Franchise Registration Application for Hawaii
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Uniform Consent to Service of Process for Hawaii
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Franchise Disclosure Document (FDD) and Exhibits including Hawaii specific addenda
No business opportunity registration law is enacted. No business opportunity registration is required.
Idaho
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Illinois
Franchise registration law is enacted. Registration is required, with a recommended filing time of 90 days. The registration fee is $500. The registration requirements include filing the Franchise Disclosure Document (FDD) with Illinois Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
These documents must also be included as PDFs on a CD-ROM.
Business opportunity law is enacted. Franchisors who register under the Illinois Franchise Act do not also have to register under the Illinois Business Opportunity Act.
Indiana
Notification state. Must file Notice of Intent, Uniform Consent to Service of Process and copy of FDD. Filing fee is $500.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors.
Iowa
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides an exemption to franchisors that are in compliance with the FTC Rule.
Kansas
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Kentucky
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors that are in compliance with the FTC Franchise Rule and for which a Notice of Exemption Affidavit and copy of FDD has been filed. There is no registration filing fee.
Louisiana
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors having a federally or state registered trademark.
Maine
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors having a federally registered trademark. If you do not have a federally registered trademark, you must file your FDD with the state. You are required to obtain a $30,000 surety bond or escrow account. The filing fee is $25.
Maryland
Franchise registration law is enacted. Registration is required, with a recommended filing time of 90 days. The registration fee is $500. The registration requirements include filing a Franchise Disclosure Document (FDD) and Maryland Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
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Advertising or promotional materials directed to prospective franchisees
These documents must also be included as PDFs on a CD-ROM.
Business opportunity law is enacted. Business opportunity law provides exemption for effectively registered franchisors.
Massachusetts
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Michigan
Franchise registration law is enacted. Registration of an annual Notice of Franchise Offering, with a recommended filing time of 10 business days. The registration fee is $250. A state specific cover page must be prepared and included in all Michigan FDDs.
Business opportunity law is enacted. Business opportunity law does not apply to franchisors who meet the franchise laws definition of a franchise.
Minnesota
Franchise registration law is enacted. Registration is required, with a recommended filing time of 90 days. The registration fee is $400. The registration requirements include filing a Franchise Disclosure Document (FDD) and Minnesota Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
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Advertising or promotional materials directed to prospective franchisees
These documents must also be included as PDFs on a CD-ROM. Advertising materials must be filed 5 days before use.
No separate business opportunity law is enacted. Business opportunities are included in the definition of a franchise.
Mississippi
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Missouri
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Montana
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Nebraska
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. “Seller-Assisted Marketing Plan” law provides an exemption for franchisors who are in compliance with the FTC Rule if the sale does not involve the use of phrases such as “buy back,” “secured investment” or the like. Franchisors must file Notice of Exemption and pay a $100 annual fee.
Nevada
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
New Hampshire
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
If your franchise involves vending machines, racks, display cases or similar devices, you may be required to register under New Hampshire Distributorship Disclosure Act.
New Jersey
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
New Mexico
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
New York
Franchise registration law is enacted. Registration is required, with a recommend filing time of 90 days. The registration fee is $750. The registration requirements include filing a Franchise Disclosure Document (FDD) with New York Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Anti-Fraud Statement
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
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Advertising or promotional materials directed to prospective franchisees
These documents must also be included as PDFs on a CD-ROM.
No business opportunity registration law is enacted. No business opportunity registration is required.
North Carolina
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption from registration for franchisors with a federally registered trademark. If you do not have a federally registered trademark, you must file your FDD with the state. The filing fee is $10.
North Dakota
Franchise registration law is enacted. Registration is required, with a recommended filing time of 30 business days. The registration fee is $250. The registration requirements include filing a Franchise Disclosure Document (FDD) with North Dakota Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
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Advertising or promotional materials directed to prospective franchisees.
These documents must also be included as PDFs on a CD-ROM. Advertising materials must be filed 5 days before use.
No business opportunity registration law is enacted. No business opportunity registration is required.
Ohio
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides an exemption to franchisors who are in “full” compliance with the FTC Rule.
Oklahoma
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors that are in compliance with the FTC Rule.
Oregon
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Pennsylvania
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Puerto Rico
No franchise registration law is enacted. No franchise registration is required. Franchisors are subject to FTC Franchise Rule.
No business opportunity registration law is enacted. No business opportunity registration is required.
Rhode Island
Franchise registration law is enacted. Registration is required, with a recommended filing time of 60 days. The registration fee is $250. The registration requirements include filing a Franchise Disclosure Document (FDD) with Rhode Island Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
-
Consent of Accountants
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Advertising or promotional materials directed to prospective franchisees.
These documents must also be included as PDFs on a CD-ROM. Advertising materials must be filed 5 days before use.
No business opportunity registration law is enacted. No business opportunity registration is required.
South Carolina
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors with a federally or state registered trademark. Need to file Affidavit of Business Opportunity Exemption. There is no filing fee.
South Dakota
Franchise registration law is enacted. Need to file Franchise Notice Filing Application, Consent to Service of Process and PDF copy of FDD on CD-ROM and any advertising materials. The registration fee is $250.
Business opportunity law is enacted. Business opportunity law provides exemption for effectively registered franchisors.
Tennessee
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Texas
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors that are in material compliance with FTC Rule. Notice of Exemption is required, with a recommended filing time of 10 business days. The filing fee is $25. This is a one-time filing, except if address changes.
U.S. Virgin Islands
No franchise registration law is enacted. No franchise registration is required. Franchisors are subject to FTC Franchise Rule.
No business opportunity registration law is enacted. No business opportunity registration is required.
Utah
No franchise registration law is enacted. No franchise registration is required.
Business opportunity law is enacted. Business opportunity law provides exemption from registration as a business opportunity for franchisors with a federally or state registered trademark. All franchisors must file a Notice of Exemption form along with the payment of a $100 annual fee. Our fee is $380.
Vermont
No franchise registration law is enacted. No franchise registration is required.
No business opportunity registration law is enacted. No business opportunity registration is required.
Virginia
Franchise registration law is enacted. Registration is required, with a recommended filing time of 60 days. The registration fee is $500. The registration requirements include filing a Franchise Disclosure Document (FDD) with Virginia Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants.
These documents must also be included as PDFs on a CD-ROM.
Business opportunity law is enacted. Business opportunity law provides exemption for franchisors.
Washington
Franchise registration law is enacted. Registration is required, with a recommended filing time of 90 days. The registration fee is $600. The registration requirements include filing a Franchise Disclosure Document (FDD) with Washington Addenda and related documents. Related documents consist of:
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Uniform Franchise Registration Application
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Franchisor’s Costs and Sources of Funds
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Uniform Consent to Service of Process
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Franchise Seller Disclosure Form
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Guarantee of Performance (if required)
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Consent of Accountants
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Advertising or promotional materials directed to prospective franchisees.