Hawaii

Registration or Filing Required? Yes, Registration
Business Opportunity Laws? Yes

Hawaii is a franchise registration state. So, while it is easy to get caught up in the tropical scenery and lounging on the beach, you must remember to register your FDD with Business Registration Division of the Hawaii State Department of Commerce and Consumer Affairs prior to offering or selling franchises in Hawaii. Hawaii charges franchisors a $250 fee for initial registrations, amendments, and renewals. Registration lasts for one year and must be renewed within three months of the close of the franchisor’s fiscal year. More information can be found on the Hawaii Department of Commerce and Consumer Affairs Website.

How Do I Know if I Have to Register?

Franchises that are subject to the Hawaii Franchise Investment Law must register in Hawaii prior to selling franchises. Franchises are subject to that law when the franchisee is domiciled in Hawaii, or the business will be operated there.

How Do I Register?

Hawaii is going GREEN, and now requests that franchisors submit their documents online through the Division’s Securities Online Portal. When completing your initial registration in Hawaii, you will be required to file the following documents:

1. A cover letter
2. The Franchisor’s FDD
3. The Uniform Franchise Registration Application
4. Consent to Service of Process
5. The Franchise Seller Disclosure Form
6. A costs and source of funds form
7. Corporate acknowledgment
8. The $250 registration fee

A franchisor’s registration expires three months after the end of its fiscal year. No more than 60 days before expiration, a franchisor should submit their application for renewal along with their most recent FDD. If the franchisor fails to submit their application for renewal before the expiration date, they will need to submit a new initial registration application.

Additionally, if any material change occurs to a franchisor’s FDD while they are registered in Hawaii, they must submit an amendment application to the Department before making any more sales of their franchise.

Are There Any Exemptions from Registration?

Hawaii has a number of scenarios in which a franchise will be exempt from registration, though most will still be required to register. Among those exemptions are:

• Any transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian or conservator
• Most offers or sales to a bank or other financial institution
• Certain motor vehicle franchises
• Offers or sales where the franchisee is not domiciled in Hawaii and will not operate the franchised business in Hawaii
• An extension or renewal of an existing franchise
• The sale of a franchise to an already existing franchisee
• Certain isolated sales made by franchisees

Besides the out-of-state franchisee exemption, most of these exemptions have a relatively narrow scope. Most franchisors will not qualify for these exemptions and require registration. If you’re wondering whether your business would qualify for an exemption, you are encouraged to reach out to your friends at Drumm Law who would be happy to give you guidance on the matter (and if you feel like taking us on a trip to Hawaii, even better – no pressure though).

Does Hawaii Impose Any Additional Restrictions on the Franchise Relationship?

Hawaii’s Franchise Investment Law also governs the franchisor/franchisee relationship and serves to provide franchisees with additional protections by limiting the requirements a franchisor can impose. Among other things, the law prohibits franchisors from:

• Prohibiting franchisees from joining franchisee associations.
• Requiring franchisees to purchase goods or services (unless reasonably necessary).
• Discriminate between franchisees with respect to royalties, goods or other services, unless they fall under one of the exemptions.
• Obtaining rebates or similar returns without first notifying the franchisee.
• Granting other franchises in a current franchisee’s territory.
• Requiring franchisees to enter into a waiver or release at the time of the franchise agreement.
• Terminating or refusing to renew a franchise without good cause.
• Disallowing the transfer of a franchise without good cause.

Franchisors who violate these provisions can be subject to civil penalties, and potentially even criminal penalties if the damages are high enough.

Fun Fact: Snakes are illegal in Hawaii! I know then how did they manage to get all those snakes on the plane with Samuel L. Jackson? Not legally I’ll tell you that much.