Living up to franchise licensing that is in compliance to state and local franchise laws is not optional.

Franchise licensing is a formal way of saying that to be in a franchise relationship, everybody has to play by the rules.  The rules that are the “big brother” over the franchise world are set both by the federal and state governments. Just as nobody wants to get in hot water with the IRS, to fail to live up to franchise law could mean that your franchise licensing will become a fond but distant memory.  If that doesn’t light a fire under you to live by the rules, nothing will.

The priority to be very fussy about maintaining a clean nose with the franchise licensing big dogs must be just as high for the franchising company as it is for the franchisor.  When you set out to franchise your business, the idea is not to just have one or two franchisors out there.  The big names in franchising like Starbucks or McDonalds have hundreds if not thousands of franchisors. Every one of those franchise owners but live up to the terms of franchise licensing both at the federal and state level.

You cannot run around behind that many franchise owners to know that they will not put your franchise licensing at risk.  The heart of how a franchisee manages the problem lies in those franchise agreements that get so much discussion as you enter into a franchise relationship with a new franchisor.

You can put some teeth into those franchise agreements. You can put as much detail as you need in those franchise documents to feel you have covered your bases to spell out to a new franchise owner exactly what is expected of them to protect their franchise licensing and yours as well.  In fact, it is smart to customize those franchise licenses by state so that you cover any quirks in franchise licensing laws that some states may throw into the mix.

Checking up on the other guy.

As a potential franchise owner, the idea of worrying whether the company offering a franchise to you is in compliance with the laws covering franchise licensing may never have worried you. You should let it worry you. The last thing you need is to sink your life savings into buying a franchise only to find that they are in legal hot water for not living up to the regulations covering their franchise licensing.

You can check up on the other guy before you even consider signing a franchise agreement with that business.  You can do some snooping around to find out how long they have been in the franchising game and if they have run afoul of franchise licensing legalities so far.  If you smell trouble during that background check, run!

In addition, be sure that the franchise agreements and other pertinent binding franchise documents are just as tough on the franchisee as they are on you about keeping their nose clean with the franchise licensing authorities. If the language of those documents is written to protect you in case there is a problem with franchise licensing at the mother ship, you will be glad you took the time to protect yourself going in.

Franchise Registration States and State Franchise Laws – part I

As start up franchise business owner you are probably already very well aware of your state franchising laws. On the other hand, if you are still working on your business and marketing strategy, and you are planning to expand nationwide, you will need to take into consideration the franchise laws in all of the states where you plan to expand. Moreover some states require that you register there even if you only plan to advertise your franchise on their territory.

There are 14 franchise registration states in The United States. They all have different franchise regulations. We have listed some of the key points in each state franchise laws and regulations. However it is strongly recommended that you consult a franchise attorney experienced in franchise law and registration procedures in each of the states where you plan to offer or sell franchise units.

US state franchise laws.

• California. According to California Franchise Investment Law and California Franchise Relations Act a franchise is the agreement between two parties, where one party gives the right to the other to use their trade name in exchange of a fee. In order to offer and sell franchises, you need to register your franchise. Visit the California Department of Corporations. There you can obtain all the legal forms and documents required. You will also need to pay a registration fee. You also need to know that every offer and sale you make must be registered with the Commissioner of Corporations. This is done with a Uniform Franchise registration Application. There are exemptions of this rule so you need to check with a lawyer about the specifics. If your business is dealing with automobiles, fuel, construction and beer, you will also need to comply with more industry specific regulations.
• Hawaii. Registration of franchises in the state of Hawaii is done through the Department of Commerce and Consumer Affairs. Similar to several other states, you will not be able to offer or sell franchises until you are registered at the state and until your disclosure agreement is approved.
• Illinois. As with the states discussed so far, offering and selling franchise units before you have registered your franchise business and have your disclosure documents approved is considered law offense. Franchise registration is done at Illinois Attorney’s General. According to state’s franchise regulations, franchise anniversary dates automatically expire 120 days after the end of the financial year. Moreover you no longer need to register your franchise brokers as you needed to do just several months ago. The registration of large franchises ($5,000,000 and $15,000,000) are processed faster and there is a $500 registration fee. Very large franchise (above 15 million) do not need to register, but they do need to provide their disclosure documents to prospective franchisees prior to signing the agreement.