Federal and State Franchise Compliance

Federal regulations have existed since 1978 when the original Franchise Rule was created by the Federal Trade Commission, or FTC. In 2007, the FTC announced that, after a 12 year regulatory review, they had revised the rules on franchises and new rules went into effect. This was the first revision to the rules since they had been originally passed. Any franchisee or franchisor in Minnesota must comply with the federal rules, unless there is an exemption, as well as the rules regarding franchises in Minnesota.

In Minnesota, all franchises, which includes business opportunities, that are sold or offered for sale in Minnesota have to be registered or exempt from registration in pursuance with the Minnesota Franchise Act. The applications must be in compliance with the Minnesota Franchise Act as well as with the 2008 NASAA Franchise Registration and Disclosure Guidelines.

Under Federal law, the 2007 Franchise Rule has new provisions for franchisors who are preparing “franchise disclosure documents” or offering circulars. From 1993 on, franchisors were permitted to put these forms into two different formats. They could follow the UFOC or the standards of NASAA. Now, with the new regulations, franchisors must use a format that is very similar to the standards of the UFOC. The form adopted has been streamlined from the original option in many places. Other areas have been completely omitted.

Also included in the federal registration regulations are the obligations and investment of the franchisees as well as the named sources for the materials that will be used in the franchise. The franchisor’s investment will also need to be included in the federal forms.

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It can be extremely difficult to understand the many details associated with business law. Fortunately, the Minnesota franchise law attorneys of Skjold Barthel are prepared to tackle any question or issue concerning franchise law that you may have, whether you are the franchisor or the franchisee. For more information on franchises, contact us today at 612-746-2560.