Franchise Registration and Renewal

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All franchises in the United States are governed by the Federal Trade Commission (FTC) under a set of franchise-specific regulations. The Federal Franchise Rule requires franchisors to give prospective franchisees “the material information they need in order to weigh the risks and benefits of such an investment.” The Franchise Disclosure Document (FDD) is a product of this rule.

North Dakota is one of 15 states that requires a franchise's FDD to be registered prior to operating in the state. Before you offer or sell a franchise in North Dakota or to any North Dakota resident you must first register your franchise offering with the Securities Department, as North Dakota treats the FDD much like a stock or security. All franchise filings must be prepared under the North Dakota Century Code (NDCC) North Dakota Franchise Investment Law (NDFIL) 51-19.

As of July 1, 2008 registration states will only accept the North American Securities Administrators Association, Inc. (NASAA) adopted Amended Franchise Rule of the Federal Trade Commission, 16, C.F.R. Part 436. The states may impose additional requirements under state law consistent with the rule.
 


Registration of Franchises under N.D.C.C. 51-19

Any person or company that intends to offer or sell franchises ("franchisor") within North Dakota or to North Dakota residents (franchisee) must register its franchise disclosure with the Securities Department. A franchisor must also give a prospective franchisee a copy of the disclosure document at least 14 days before the execution of a franchise agreement.

All Franchise filings and corresponding fee payments are made through the NASAA Electronic Filing Depository (EFD)

Summary of Filing Requirements:

  • Cover Letter
  • Application Page
  • Franchisor's Costs and Sources of Funds Form
  • Auditor's Consent Form
  • Uniform Consent to Service of Process
  • Certification Page
  • Proposed Franchise Disclosure Document (FDD) on CD-ROM 
  • Advertising proposed for use in North Dakota
  • Registration fee: $250.00 - NDCC Section 51-19-17
  • The registration period is twelve months from the effective date, unless the Commissioner by order or rule specifies a different time. - NDCC Section 51-19-17

The Franchise Disclosure Document (FDD), NASAA's 2008 Franchise Registration and Disclosure Guidelines is available from the NASAA website.
 


Financial Assurances

NDCC Section 51-19-07 - The Commissioner will require one form of financial assurances for those initial startup franchise registrations that submit unaudited opening balance statements. Additional information and forms can be found in the Franchise Fund Packet.
 


Restrictions Deemed Unfair or Inequitable to ND Franchisees

(NDCC Section 51-19-09) - The Securities Commissioner has held the following to be unfair, unjust, or inequitable to North Dakota Franchisees:

  • Restrictive Covenants: Franchise Disclosure Documents (FDD) that disclose the existence of covenants restricting competition contrary to NDCC Section 9-08-06, without further disclosing that such covenants will be subject to the statute.
  • Situs of Arbitration Proceedings: Franchise agreements providing that the parties must agree to the arbitration of disputes at a location that is remote from the site of the franchisee's business.
  • Restrictions on Forum: Requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota.
  • Liquidated Damages and Termination Penalties: Requiring North Dakota franchisees to consent to liquidated damages or termination penalties.
  • Applicable Laws: Franchise agreements that specify that they are to be governed by the laws of a state other than North Dakota.
  • Waiver of Trial by Jury: Requiring North Dakota Franchises to consent to the waiver of a trial by jury.
  • Waiver of Exemplary & Punitive Damages: Requiring North Dakota Franchisees to consent to a waiver of exemplary and punitive damage.
  • General Release: Franchise Agreements that require the franchisee to sign a general release upon renewal of the franchise agreement.
  • Limitation of Claims: Franchise Agreements that require the franchisee to consent to a limitation of claims. The statute of limitations under North Dakota law applies.
  • Enforcement of Agreement: Franchise Agreements that require the franchisee to pay all costs and expenses incurred by the franchisor in enforcing the agreement. The prevailing party in any enforcement action is entitled to recover all costs and expenses including attorney's fees.

The above restrictions should be addressed with a State specific addendum to the Franchise Disclosure Document (FDD)for North Dakota.
 


Renewal of Franchise Registration under N.D.C.C. 51-19-07

A registration renewal application must be filed no later than fifteen business days prior to the expiration of the registration unless such period is waived by order of the Commissioner.

All Franchise filings and corresponding fee payments are made through the NASAA Electronic Filing Depository (EFD)

Summary of filing requirements:

  • Cover Letter
  • Application Page
  • Franchisor's Costs and Sources of Funds Form
  • Auditor's Consent Form
  • Certification Page
  • Proposed Franchise Disclosure Document (FDD) on CD-ROM and a MARKED FDD with changes
  • Any advertising not previously filed
  • Renewal fee: $100.00 

 


Amendments

A franchisor shall promptly file an amendment disclosing any material change in the information contained in the application as originally submitted, amended or renewed.   

Summary of filing requirements:

  • Cover Page
  • Signature Page
  • MARKED amended pages
  • Filing fee: $50.00
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Helpful Links

  • A Consumer's Guide to Buying a Franchise  -  The Federal Trade Commission, the nation’s consumer protection agency, has prepared this Guide to help you decide if a franchise is right for you. It suggests ways to shop for a franchise opportunity and highlights key questions you need to ask before you invest. The Guide also explains how to use the disclosure document that franchisors must give you — under the FTC’s Franchise Rule — so you can investigate and evaluate a franchise opportunity.
  • NASAA's Franchise Registration and Disclosure Guidelines - The North American Securities Administrators Association (NASAA) has adopted the disclosure requirements of the Amended FTC Franchise Rule, with minimal additional requirements, as the successor to the Uniform Franchise Offering Circular Guidelines adopted on April 23, 1994.
  • Basics of the Franchise Disclosure Document (FDD):  A Primer on This Important Paperwork (Link to FranchiseDirect.com).
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Laws, Rules and Orders

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For Franchise Assistance Contact:

Diane Lillis, Franchise Examiner / Budget Administrator, Email:  dlillis@nd.gov

Phone: (701) 328-4712,ND Toll Free: (800) 297-5124