If you’re thinking about investing in a franchise, legal compliance might not be the first thing on your mind—but it should be. Some U.S. states have specific laws that require franchisors to register before they can sell a franchise. These “franchise registration states” can impact how—and when—you’re able to move forward with your purchase. Understanding these regulations is essential to avoid unexpected delays or legal complications on your path to business ownership.
What Are Franchise Registration States?
Franchise Registration States are U.S. states that require franchisors to register their Franchise Disclosure Document (FDD) with a state regulatory agency before they can offer or sell a franchise within that state. This registration process often includes a detailed legal review of the FDD to ensure it complies with state-specific regulations and offers adequate protection for potential franchisees (International Franchise Professionals Group).
To understand how registration states compare to others, it’s helpful to look at the two other categories of states: Filing States and Non-Registration States.
- Filing States (e.g., Florida, Texas): These states require franchisors to submit a notice filing or provide a copy of the FDD, but the documents are not subject to an in-depth review. The process is generally faster and less intensive than full registration.
- Non-Registration States: These states don’t require any registration or filing at the state level. However, franchisors still must comply with the Federal Trade Commission’s (FTC) Franchise Rule, which mandates that all franchisees receive an FDD at least 14 days before signing a contract or paying any fees.
The purpose of registration and filing requirements is consumer protection. By requiring franchisors to submit their FDD for review, states aim to ensure franchise buyers are informed and shielded from potentially misleading or unfair business practices.
Franchise Registration States
As of now, the following 13 states are classified as Franchise Registration States:
- California
- Hawaii
- Illinois
- Indiana
- Maryland
- Michigan
- Minnesota
- New York
- North Dakota
- Rhode Island
- Virginia
- Washington
- Wisconsin
It’s important to note that registration is not guaranteed in these states. Regulators can request revisions to the FDD or impose state-specific disclosure obligations before granting approval.
In addition, several states—Connecticut, Maine, North Carolina, and South Carolina—require FDD registration only if the franchisor’s principal trademarks are not registered with the United States Patent and Trademark Office (USPTO). This conditional requirement adds another layer of complexity for franchisors and should be understood by franchisees evaluating opportunities across different states.
What Is Required to Register in These States?
While each state may have its own nuances, these steps form the core of the registration process:
- Submitting the FDD to the state’s franchise examiner for detailed review.
- Paying registration fees, which vary depending on the state.
- Completing state-specific application forms that outline business structure, legal history, and other required disclosures.
- Providing financial statements, most often audited by an independent CPA.
- Responding to comment letters if the state requests revisions or clarifications to the FDD.
A Couple of Exceptions
While registration is required in certain states, there are notable exceptions that may exempt some franchisors:
- Large Investment Exemptions – Some states waive registration requirements for franchise sales involving substantial upfront investments, typically over $1 million.
- Experienced Franchisor Exemptions – Franchisors with strong financials or a long track record may qualify for exemptions based on net worth, operational years, or number of franchises sold.
Why Franchise Registration States Matter to Franchisees
If you’re considering buying a franchise, registration states provide an added layer of protection. These states help ensure that franchisors deliver accurate, transparent, and legally vetted information through their FDD.
Before you invest, check whether the franchisor is registered to operate in your state. If they aren’t, they are not legally permitted to sell you a franchise there. This could delay your plans—or halt them entirely—if registration isn’t complete.
Thinking About Buying a Franchise?
Before you sign any agreement, make sure your franchisor is properly registered in your state. Not sure where to start? We’re here to help. Let one of our expert franchise consultants walk you through your state’s requirements, verify compliance, and help you avoid delays or costly legal pitfalls. Schedule a free consultation today!