North Carolina

Registration or Filing Required? No*
Business Opportunity Laws? Yes

North Carolina is not a franchise registration state nor a franchise filing state. However, North Carolina does have business opportunity laws that sellers of business opportunities must adhere to. However, most franchisors are exempt from complying with those laws if their franchise is the owner or licensee of a federally registered trademark. More information can be found at the North Carolina Secretary of State’s Website.

Is My Franchise Exempt, and if so, do I need to File Anything?

The North Carolina Businesses Opportunity Sales Act defines a business opportunity as the sale or lease of any products, equipment, supplies or services for the purpose of enabling the buyer to start a business, where the seller represents one of the following:

1. The seller will provide locations or assist the buyer in finding locations for the use or operation of vending machines, racks, display cases, or other devices;
2. The seller may purchase products made by the buyer using the supplies or services sold to them by the seller;
3. The seller guarantees the buyer will derive income that exceeds the purchase price or will refund all or part of the prices paid (the purchase price must have been greater than $200); or
4. The seller will provide a sales or marketing program in conjunction with the agreement (and the buyer has to pay a fee of greater than $200). This does not apply to sales or marketing programs made in conjunction with the license of a federally registered trademark.

A franchise business would fall under the definition of a “business opportunity” in North Carolina, except for the exclusion of sales or marketing programs made in conjunction with the licensing of a federally registered trademark. So, a franchisor will typically be exempt if it has a trademark on the federal register. However, if the franchisor’s business or offer falls under subsections 1, 2 or 3 above, it will still be subject to North Carolina’s business opportunity laws. There are several other types of business listed in the state’s statutes that do not qualify as business opportunities, but these would not apply to most franchisors.

If a franchise has a trademark registered with the USPTO (and does not otherwise qualify as a business opportunity), the franchise does not need to file any notice or letter with the state and can proceed to sell franchises while relying on that exemption.

There has been discussion among the North Carolina lawmakers as to whether a franchise is a de facto guarantee of income and would therefore qualify as a business opportunity regardless of the trademark exemption. If North Carolina were to take that stance, then almost all franchisors would need to register as a business opportunity in the state. However, at this point in time, franchisors can still rely on the trademark exemption with some reasonable sense of certainty, and most go the extra mile to explicitly state that they do not guarantee that franchisees receive income from their franchised business.

What Should I Do if My Franchise is Not Exempt?

If you do not have a federally registered trademark for your franchise you will be subject to provisions of the state’s Business Opportunity Sales Act. The Act puts a significantly greater burden on your franchise, including more stringent disclosure documents and obtaining surety bonds. In this case, we would recommend obtaining a federally registered trademark for your franchise. Our brilliant trademark attorneys would be more than happy to help you register your mark. See our Trademarks page for more information.

How Do I Register?

If your business is not exempt and you do not want to obtain a federally registered trademark, you will need to comply with North Carolina’s Business Opportunity Act. The Act requires a business opportunity seller to submit the following documentation to the NC Secretary of State Business Opportunity Sales at PO Box 29622, Raleigh, NC 27626:

1. A cover letter addressed to the North Carolina Secretary of State
2. Two copies of the franchisor’s FDD
3. A Consent to Service of Process
4. Two copies of the Surety Bond (if applicable)
5. A check for $250 made payable to the North Carolina Secretary of State

This registration must be renewed every year. North Carolina typically registers business opportunities within 2 to 3 days of receiving the required documents.

If a business opportunity guarantees that the buyer will derive income from the sale, the seller must obtain a surety bond issued by a surety company authorized to do business in the state or establish a trust account with a bank or savings institution located in North Carolina. The amount of the bond must be at least $50,000. Generally, the Secretary of State will assume a franchise falls under that category unless the franchisor presents evidence it should be exempt from securing said bond.

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