State Franchise Registration Status and Franchise Laws
Wisconsin
Registration or Filing Required? Yes, Registration
Business Opportunity Laws? No
Wisconsin is a franchise registration state. So, you must register your FDD with the Wisconsin State Department of Financial Institutions Securities Division prior to offering or selling franchises in the state. Wisconsin charges a $400 fee for its registration application, and registration expires 1 year after the effective date of registration. More information can be found on the Wisconsin Department of Financial Institutions’ Website.
What is Considered a Franchise in Wisconsin?
Wisconsin defines a franchise as an agreement in which:
- The buyer is granted the right to offer, sell, or distribute goods or services under a marketing plan prescribed by the seller;
- The operation of the business is substantially associated with a trademark or other commercial symbol designating, owned by, or licensed by the seller; and
- The buyer pays a franchise fee.
How Do I Know if I Have to Register?
Franchises are subject to Wisconsin’s Franchise Investment Law whenever the offer to sell a franchise originates in, is directed to, or is accepted in the state. Franchisors only need to register if their offer is directed to or accepted in Wisconsin (not if it originates in Wisconsin).
How do I Register in Wisconsin?
Registering in Wisconsin is now done through their online application system. For your registration you will need to fill out the information required on their application and upload a PDF of your FDD (make sure it includes all exhibits to avoid additional filing fees). In addition to your FDD, you must also provide:
- The Franchisor’s name, trade name, principal business address and contact person
- The states where the franchisor intends to register
- A Uniform Consent for Service of Process
- The $400 filing fee payable by credit card or E-check
Wisconsin is unique in that its statutes do not allow for franchisors to “renew” their registration, and because of that they must complete this registration process every year. Also, unlike other registration states, your FDD will be registered automatically at the time you file it – there is no formal review done by Wisconsin. Additionally, Wisconsin does not have any additional financial assurance requirements.
What if I Make Changes to my FDD?
You must file an amendment application within 30 days of making a material change to the information contained in the FDD. What constitutes a material change is subjective, and your friends here at Drumm Law would be happy to discuss whether a change to your FDD would qualify as a material change. Amendments can be filed in the same online portal as other applications and must include the same information required for a normal registration. The only difference is that the fee for filing an amendment is $200.
Are There Any Exemptions to Registration?
Wisconsin does exempt some franchise sale scenarios from registration. A sale is excluded if it involves a relationship where the franchisee has been in the business for more than 2 years, and sales from the new agreement are not expected to account for more than 20% of the franchisee’s gross sales revenue for at least a year. Agricultural producers’ associations or organizations operated on a cooperative basis by independent retailers selling goods and services to their own members are also excluded.
Other exempted transactions include private franchisee and sub franchisor sales, and transactions involving experienced franchisees. In order to qualify for the experienced franchisee exemption: (i) the sale must involve a payment of at least $100,000 and that amount cannot constitute more than 20% of the franchisee’s net worth; and (ii) the franchisor must reasonably believe the franchisee has sufficient knowledge to evaluate the risks of the franchise investment.
These exemptions are assessed on a case-by-case basis, and franchisors still have to file for approval of an exemption. This can sometimes be a more arduous process than simply registering the franchise in Wisconsin.
Are There Any Additional Franchise Laws in Wisconsin I Should Know About?
In addition to the Franchise Investment Law, Wisconsin also has additional rules laid out in its Administrative Code regarding franchises. However, neither of these laws impose any significant additional burdens on franchisors outside of the standard prohibition against any fraudulent, deceitful or misleading practices. The Wisconsin Fair Dealership Law however, does prohibit franchisors for terminating or not renewing a franchise agreement without good cause. It also requires them to provide franchisees with 90 days’ notice of their decision, and 60 days to cure, with limited exceptions.