Registering a franchise in the United States can be a complicated and time-consuming process.
There are different requirements in each state, and the process can vary depending on the type of franchise you’re looking to register.
So, what are the franchise registration states, and how does the process work? Read on to find out everything you need to know about registering a franchise in the United States.
What Is Franchise Registration?
Franchise registration is the process of registering your franchise with the relevant state authorities.
This is a legal requirement to franchise business in many states, and it’s used by franchisors to guarantee that their franchisees are extended the most favorable financing and business terms possible.
If a franchise brand has a certified Franchise Registry status, lenders will know that the business is aware of its risk profile and has received recommendations on improving its performance. This will give lenders the confidence they need to make loans to the brand.
The registration process can vary from state to state, but it usually involves submitting a formal application along with supporting documentation.
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Franchise Registration States
Before you are allowed to offer and sell a franchise in a state, you must first register your franchise paperwork (with the relevant authorities in that state) and then renew those registrations annually.
The registration states are:
|Commissioner of Securities Department of Commerce and Consumer Affairs Business Registration Division Securities Compliance Branch 335 Merchant Street, Room 203, Honolulu, HA 96813
|Franchise Division Office of Attorney General 500 South Second Street
|Franchise Division Office of Secretary of State 302 W. Washington St., Rm. E111 Indianapolis, IN 46204
|State Corporation Commission Division of Securities and Retail Franchising 1300 E. Main St. 9th Floor Richmond, VA 23219
|Department of Financial Institutions
150 Israel Rd SW
Tumwater, WA 98501
|Department of Financial Institutions Division of Securities 345 West Washington Ave., 4th Floor Madison, WI 53703
|California Department of Financial Protection and Innovation 2101 Arena Boulevard, Sacramento, CA 95834
|Office of the Attorney General Division of Securities 200 St Paul Place Baltimore, Maryland
|Michigan Attorney General’s Office
Consumer Protection Division
Attn: Franchise Section
525 W. Ottawa Street
Williams Building, 1st Floor
Lansing, MI 48933
|Minnesota Department of Commerce
85 7thPlace East, Suite 280
St. Paul, MN 55101-2198
|orth Dakota Securities Department
600 East Boulevard Ave., State Capital Fifth Floor, Dept. 414
Bismarck, ND 58505-0510
|New York State Department of Law
Investor Protection Bureau
28 Liberty Street, 21st Floor
New York, NY 10005
|Franchise Office Division of Securities John O. Pastore Office Complex 1511 Pontiac Avenue, Bldg. 69-1 Cranston, RI 02910
States For Franchise Filing
Apart from the Franchise Registration states, there are a few other states which require you to file specific paperwork in order to sell franchises.
Franchise registration states require documentation to request approval to sell franchises, whereas franchise filing states only require the franchisor to submit and pay the filing fee.
The following states accept franchise applications from businesses with federally registered trademarks:
- South Dakota
- South Carolina
- North Carolina
Franchises that don’t have federally-registered trademarks can also file in Georgia and Louisiana.
How The Franchise Registration Process Works?
No matter how long a franchisor has been in business, registering a franchise is always a somewhat involved process.
In order to offer and sell a franchise in one of the registration states mentioned above, you must register and yearly renew your franchise documentation with the state authorities.
Most states have varied criteria for registering a franchise, including numerous disclosures which must be properly filed. Some states also require annual registration to make sure the franchise abides by all laws and regulations.
Each Franchise Disclosure Document (FDD) submitted by a company looking to offer or sell a franchise in a state is examined by a regulatory oversight organization that is present in that state.
These monitoring organizations thoroughly examine the FDD to make sure it complies with state rules.
Usually, the state should review an FDD and, if required, demand that a franchisor clarify particular clauses.
The franchisor is then requested to resubmit their paperwork after making the necessary state-recommended adjustments.
If not managed properly, the entire procedure can be arduous and take months to complete.
There are 3 types of state registration for franchises. It is important that the franchisor read the laws and regulations of each state:
- Franchise filing states require franchisors to submit an FDD and pay a fee without further state approval.
- Franchise licensing States demand that franchisors submit an FDD, pay a filing fee, and get state approval.
- Franchise non-registration states require that in order to market and sell franchises there, franchisors must submit their FDDs and abide by FTC guidelines.
Franchisees should understand that regardless of the state they reside in, it is important to do their homework before investing in a franchise.
This includes investigating not only the franchisor and their business model but also the registration status of the franchise in the state you are looking to purchase it.
What Does FDD Registration Involve?
To become FDD registered, a franchisor must first submit an FDD and a franchise registration request to a state examiner, who then decides whether or not to grant the franchisor the ability to market and sell franchises inside the state.
The state regulators are not responsible for verifying the veracity of the disclosures that are included in the FDD.
Instead, they are responsible for determining whether or not the FDD satisfies the requirements imposed by the state.
State examiners will look through the franchise’s financial statements, and registration can be contingent on whether or not certain financial assurance standards are met.
Knowing which states require franchise registration and how to proceed is critical for any franchisor looking to do business in the United States.
By understanding the process and the states involved, you can be sure to avoid any costly delays or missteps.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.