Being informed on state requirements can help determine where to set up your next franchise.
Expanding a franchise is an exciting time, but it also means learning new state franchise laws. Each state has unique laws in order to oversee franchises that enter the state. Some states require franchisors to register or file their Franchise Disclosure Document (FDD) before moving forward with franchise expansion. It’s important to understand that states fall into three categories when it comes to registration requirements: non-registration states, filing states and registration states. Below you will find a detailed explanation of what these requirements mean and which states are impacted by each category.
1. Non-Registration States
Non-registration states simply require all franchisors have an FDD with a registered trademark. Once this step is complete, franchisors are able to sell their franchise without state intervention.
Current non-registration states include:
Alabama; Alaska; Arizona; Arkansas; Colorado; Delaware; District of Columbia; Georgia; Idaho; Iowa; Kansas; Louisiana; Massachusetts; Mississippi; Missouri; Montana; Nevada; New Hampshire; New Jersey; New Mexico; Ohio; Oklahoma; Oregon; Pennsylvania; Tennessee; Vermont; West Virginia; Wyoming.
2. Filing States
Filing states require franchisors to pay a fee and file their FDD with the state. Once the FDD is filed and fees are paid, the franchise is welcome to expand into that state. There is typically no FDD review process in filing states.
Current filing states and fees include:
Connecticut - Initial Filing Fee: $400
Florida - Initial Filing Fee: $125
Kentucky - Initial Filing Fee: No Fee
Maine - Initial Filing Fee: $25
Nebraska - Initial Filing Fee: $100
North Carolina- Initial Filing Fee: $10
South Carolina - Initial Filing Fee: No Fee
South Dakota - Initial Fee: $250
Texas - Initial Filing Fee: $25
Utah - Initial Filing Fee: $100
3. Registration States
In registration states, the Federal Trade Commission (FTC) requires the franchisor’s FDD be registered with that state before a franchise can expand within that state. The FDD will be reviewed by the state and edits will be provided to the franchisor. In addition to the FDD registration, franchisors will be required to pay a registration fee and an annual renew fee. It is helpful to consult a franchise lawyer during the registration process because failure to abide by state laws can result in penalties and fines.
Current registration states and fees include:
California - Initial Fee: $675
Hawaii - Initial Fee: $125
Illinois - Initial Fee: $500
Indiana - Initial Fee: $500
Maryland - Initial Fee: $500
Michigan (Only Notice) - Initial Fee: $250
Minnesota - Initial Fee: $400
New York - Initial Fee: $750
North Dakota - Initial Fee: $250
Rhode Island - Initial Fee: $500
Virginia - Initial Fee: $500
Washington - Initial Fee: $600
Wisconsin - Initial Fee: $400
Once you have decided which state you would like to expand to, you should contact that state’s government agency to move forward. It’s a long process, but it will be worth it once you open your doors to new consumers, create jobs in a new market and impact the local economy!