Ohio

Registration or Filing Required? No
Business Opportunity Laws? Yes

Ohio is not a franchise registration state nor a franchise filing state. So, you may offer or sell your franchise without registering or filing your Franchise Disclosure Document (“FDD”) with the state, provided that you are compliant with the Federal Franchise Rule.

Does Ohio Have Specific Franchise Laws?

While not franchise specific, Ohio does have Business Opportunity Laws. Ohio defines a business opportunity as a sale where the buyer is required to make an initial payment of more than $500 but less than $100,000, be supplied goods or services by the seller, and the seller makes one of the following representations:

1. The buyer will be provided with retail outlets, accounts, or help establishing them;
2. The buyer will be provided with locations (or help finding locations) for vending machines, rack displays, or similar equipment used for the distribution or sale of the goods or services;
3. The buyer can earn a profit greater than the initial payment;
4. There is a market for the goods or services; or
5. There is a buy-back arrangement.

Generally, these laws do not apply to the sale of franchises. The one exception is that franchisors are prohibited from representing that a franchisee’s initial payment or promissory note is secured, or that the franchisor provides a buy-back arrangement. If a franchisor wants to make such representations it must obtain $50,000 a surety bond or establish and maintain a $50,000 trust account in Ohio, during the first six months of the franchisor’s business.

Business opportunities that are subject the state’s law governing business opportunity plans must comply with the specific disclosure requirements provided by the statutes. Additionally, business opportunity sellers are prohibited from accepting more than 20% of the initial payments before they have delivered the goods necessary to start the business (unless the initial payments are placed in escrow). Buyers are also permitted to cancel the agreement within 5 days of executing it, or within 12 months of execution if the seller has not provided the buyer with the required cancellation disclosures and notice forms.

What Exemptions Are There?

Ohio has numerous exemptions to its business opportunity laws. Situations where those laws do not apply include:

1. Franchises that are compliant with the FTC franchise rules.
2. Not-for-profit sales of demonstration equipment and materials for $500 or less.
3. Employer-employee or business partner relationships.
4. Members of: (a) cooperative association of producers of agricultural products; or (b) cooperative organization of independent retailers furnishing goods to members.
5. Agreements for the use of trademarks, advertising or other commercial symbols designating a person or business as a servicer of particular goods or services.
6. A single trademark license.
7. Transfers of a registered security.
8. Real estate licensee transactions governed by real estate law.
9. Publishing, broadcasting, printing or other means of disseminating information on behalf of others.
10. Licenses granted by a general merchandise retailer to sell goods or services under its trademark provided that it has done business in Ohio for 5 years and also sells the same goods or services directly to public.
11. The sale of a properly equipped business that is open to the general public and has operated in same location for at least 6 months.
12. The sale or lease of goods or services to a buyer who offers, sells or distributes other goods not supplied by seller.
13. Agreements to offer, sell or distribute goods on the seller’s own premises for seller’s own merchandising activities, where the seller is a retailer.
14. Sellers whose most recent audited financial statement shows a net worth of at least $15 million and had at least 25 buyers at all times during preceding 5-year period.
15. The sale or lease of goods or services to a buyer who bought goods or services under the same trademark for 6 months.
16. The renewal or extension of a business opportunity plan.

Fun Fact: We’re all about drums here at Drumm. The world’s largest drum sticks are located in David Grohl Alley (yes, that’s who you think it is) in Warren, Ohio. Each is 23 feet long and weighs half a ton. Does it really count as a drum stick if it’s never hit an actual drum?