Are you considering buying a franchise in a state that requires franchisors to register their franchise disclosure documents with the local state regulator before selling? If so, then you should read this post to understand how it works and why it’s important to ensure that the franchise you’re interested in is registered in your state.
In this post, we’ll discuss registration states, what they are, why they matter, and how they impact your franchise buying decision.
What Are Registration States?
Registration states are states that have issued supplemental franchise laws in addition to federal franchise laws. These laws require franchisors to register with their franchise disclosure documents with the local state regulator before offering or selling a franchise within that state.
There are 13 registration states in the US: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, Virginia, Washington, and Wisconsin.
Why Do Registration States Matter?
Registration states matter because they affect the franchise buying process. If you live in a registration state and want to buy a franchise from a franchisor who is not registered in your state, then you can’t legally buy that franchise until they are registered.
The franchise disclosure document is issued every year, so even if a franchisor was registered last year, they must still reapply each year. This process can take some time, which is why some franchisors may hold off registering in some states initially, especially if they are a newer brand.
What Should You Do if You Live in a Registration State?
If you live in a registration state and want to buy a franchise, the first thing you should do is ask the franchisor if they are registered in your state. If they are, then you can move forward with the buying process. If they are not, you should ask when they plan on registering.
It’s also important to note that if you are planning on moving to a non-registration state, your registration status is based on where you currently reside. Therefore, you need to make sure that you update your address with the franchisor when you move to avoid any issues.
If you’re considering buying a franchise in a registration state, it’s important to understand the laws and regulations that apply. Contact the franchisor to confirm registration and remember to always consult with a franchise attorney before making any buying decisions.
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