FRANCHISE REGISTRATION
DEFINITION OF FRANCHISING Franchising is a method of marketing and distributing goods and services. Franchises are offered and sold for many types of businesses, including services, retail trade, finance, real estate, transportation, and communications. A franchise is broadly defined as a contract or agreement between two or more persons by which the franchisor (the seller), for a fee, gives the franchisee (the buyer) the right to engage in the business of offering or distributing goods or services using the franchisor’s trade name, trademark, servicemark, logotype, advertising or other commercial symbol. Both the franchisor and the franchisee must have a community of interest in the marketing of the goods or services. Under the Minnesota franchising statute, a franchise also includes business opportunities in which the seller sells or leases products or services to the purchaser and represents that the seller will find or assist in finding locations; or represents that the seller will purchase the products made; or guarantees that the purchaser will make a profit. FRANCHISE REGISTRATION AND REGULATION Any proposed offer or sale of a franchise that meets the above definition may be subject to the registration and other requirements of the Minnesota Franchise Act (Minn. Stat. Chapter 80C) and rules of the Minnesota Department of Commerce, Minnesota Rules 2860.0100-2860.9930. Unless there is a specific statutory exemption, a proposed franchise must be registered with the Department of Commerce and must be effective before any offers or sales are made. The Minnesota Franchise Act and rules define franchises and exemptions; establish registration criteria, procedures, and fees; set requirements for public offering statements; define unfair and prohibited practices; mandate the keeping of books and records; establish enforcement standards, and provide for imposition of civil liability for violations. The Act and rules also address issues like termination and notice periods for non-renewal of franchises, liquidated damages, termination penalties, arbitration, security deposits and governing law. Minnesota accepts franchise applications which comply with the Uniform Franchise Offering Circular (UFOC) Guidelines of the North American Securities Administrators Association. The UFOC Guidelines prescribe disclosures that a franchisor must make available to prospective franchisees, and require that franchisors supply prospective franchisees with audited financial statements and copies of all proposed contracts and agreements pertaining to the proposed franchise relationship. MINNESOTA DEPARTMENT OF COMMERCE ENFORCEMENT ACTIONS The Enforcement Division of the Minnesota Department of Commerce investigates complaints against companies selling franchises and business opportunities. Action can be taken only when a violation of the Minnesota Franchise Law has occurred. Enforcement actions can be viewed on the Minnesota Department of Commerce website. Contact information is the Resource Directory section of this Guide.
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