Michigan Business Lawyer Blog

Statutes requiring franchise registration and the delivery of disclosure documents
to prospective franchisees prior to an offer to sell or a sale of a franchise have been enacted in California, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. In addition to these states, Hawaii and Oregon impose disclosure, but not registration requirements on franchisors. Hawaii also requires that the disclosure document be filed with state authorities and thereby made available to the public. The business opportunity laws in Nebraska, Texas, and Kentucky require franchisors to provide disclosure to prospective franchisees, file a one-time notice of exemption, and pay the required fee to avoid the substantive requirements of the statute.

Twenty-two states (including some who have franchise disclosure statutes) have enacted “business opportunity” legislation requiring registration and/or disclosure of information concerning business opportunity ventures. Two other states have enacted laws that regulate only the substantive aspects of selling business opportunities. In some situations, these statutes are applicable to selling franchises. However, in many situations, if a state has a separate statute dealing with registration and/or disclosure relative to selling franchises, franchisors will be exempted from complying with that state’s “business opportunity” laws.

Most state franchise statutes require the advertising and promotional material that offers franchises for sale be submitted to state franchise authorities for review several days prior to the first publication or dissemination in the state. Each state also has various laws which govern a franchisor’s interaction with the franchisee as well as business opportunity laws that may apply to the offer to sell a franchise or the administration of a franchise agreement.