The franchise law is a blend of federal and state laws used in several ways–governing the registration, offer, and sale of franchises and regulating the legal relationship between the transacting parties–franchisors and franchisees. A franchise law attorney can help you understand how franchise law works.

The Federal Franchise Rule governs franchised businesses in the United States and applies to all fifty states. That said, it’s essential to consult a franchise law attorney if you’re looking forward to starting a franchise in the U.S.

The Federal Franchise Rule Explained

The Federal Franchise Rule states the standards for making a franchise disclosure and allows individual states to supplement the federal law with state-specific franchise laws. Besides the Federal Franchise Rule, Franchise laws deal with more issues, such as statutory franchise laws relating to franchise disclosure, the working relationship between franchisors and franchisees, and all matters about the review of the franchise disclosure documents.

The states where the FDD is registered with the local state are called franchise registration states. On the other hand, states are called franchise filing states, where a notice or exemption request is made with the state. States that do not require either registration or filing are called “non-registration states.”

Summary of Franchise Law

1. Federal and State Franchise Law
The Franchise Law is a combination of both federal laws and state laws.

2. Federal Franchise Rule
The Federal Franchise Rule governs the offer and sale of franchises in the U.S of America.

3. State Franchise Laws
The state franchise laws refer to each state’s statutory rules and regulations to regulate franchised businesses within such jurisdictions. If a state doesn’t have any working franchise laws, the federal franchise rule shall come into play in that state. However, most states have active franchise laws.

4. the Franchise Registration States
A franchise registration state is where franchisors should register their FDD before making a sales offer for a franchise within that state. In such conditions, franchisors are required to renew and update their FDD registrations once each year.

What Laws Govern a Franchise?

All franchise agreements should specify the primary statutory laws. Most franchisors prefer to adopt the rules of their home states. That said, the franchisor must comply with the statutory franchise laws when drafting an FDD when the prospective franchisee is a resident of the same state. Federal regulations will come into play if the prospect resides in another state. The Federal Franchise Rule does not require franchisors to register or file their FDDs with the FTC. However, franchisors must comply with federal law requirements when making a sales offer for a franchise.
The franchise law governs the working relationship between a franchisor and a franchisee. It’s essential to consult a franchise attorney to understand the franchise laws that apply to your state.