The Federal government says that if you’re going to offer a license of your intellectual property in exchange for payment, you have to disclose certain information to interested parties prior to taking their money. That information is provided so that buyers can compare “apples to apples”. The primary purpose and philosophy behind this disclosure is to level the information playing field. It is assumed, rightfully so, that you, as the brand owner, have much more information about the brand, the history of the business, the cost, etc. This information is formally presented in a Franchise Disclosure Document or FDD, which you are required to prepare and update on a regular basis.
If a state does not have a specific disclosure or filing requirements for your FDD, it is considered a “federal state” meaning that no registration of the FDD is required in order to sell franchises.
However, even in federal states, there could be state specific franchise laws known as franchise relationship laws or business opportunity laws that govern the relationship between you and your future franchisees.
Don’t assume just because a state is a federal state that the franchise agreement between you and your franchisee is the last word governing the relationship. In the event of a dispute, issue or question please call us first so we can give you the latest updates on where the relevant state law stands.
