Is Your Franchise Registered in Your State? Why It Matters

The FTC's Franchise Rule sets a federal floor: every franchisor selling in the U.S. must provide an FDD, 14 days before signing. But 14 states go further and require franchisors to actually register their FDD with a state regulator and get it approved before they're allowed to offer franchises there at all: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin.

Registration isn't just paperwork. State regulators in these states review the FDD for compliance before approving it, and several — California and New York in particular — have their own franchise relationship laws layered on top, covering things like termination rights and renewal that go beyond what federal law requires.

If you live in one of these states, or the franchise territory you're evaluating is located there, it's worth directly asking the franchisor whether they're currently registered in your state. A franchisor that's lapsed on registration, or never registered at all, is a legal problem you don't want to inherit along with the franchise agreement.

This is exactly the kind of detail that's easy to miss reading an FDD cover to cover on your own — and exactly what we check before we ever recommend a brand to a client.