The saga continues with our How to Franchise Your Business mini-series. So far, we’ve covered step one, preparing your business for franchising, and step two, drafting the legal documentation. So what’s next? Once you’ve got your Franchise Disclosure Documents polished and an experienced franchise professional has signed off on them (I can’t say this enough!), it comes time to actually register your franchise. While franchising is governed under Federal Law, which requires you to provide an FDD to your franchisees with the mandated items we discussed last post, registration with the Federal Trade Commission is not required. However, many states–24 to be exact–have their own franchise laws. When you drafted your FDD, you should have mapped out a plan for which states you plan to sell franchises and disclosed them within the document. Certain states have specific franchising requirements that will require various addenda to your document in order to comply with their state laws.
The states with their own franchising laws can be divided into two categories: registration states and filing states. For the registration states, you will have to meet all the criteria that is listed for each state. Unfortunately, each state has developed their own requirements for this process, so registering could be very simple or complex depending on which state you are looking to sell franchises in. Most registration states will require you to renew your registration on an annual basis, however there are a few exceptions that require renewal more or less frequently. The process for the filing states is much simpler. You only have to file an exemption with these states once, and then you won’t have to renew your exemption with that state again. All other states that don’t fall within these two categories don’t require you to do any additional legwork other than providing your franchisees with an accurate and up-to-date copy of the FDD. So how do you know which state falls under which category? We have them all split up for you in the info-graphic below:
As mentioned previously, those states that fall within the registration and filing states all have their own process for how you file or register your franchise with them including specific application forms, fees, and more. While it is in your best interest to consult a franchise professional to assist you with the registration process, it never hurts to be in the know and understand the requirements for getting your franchise ready for sale. For more information on the requirements for each of these states, head over to our franchise your business page where you can find detailed information on the requirements for each one.