Franchising in Ketucky
Kentucky Franchise Law
Is Kentucky a Franchise Registration State?
Kentucky is a business opportunity state with an exemption for franchisors. Kentucky does not require franchisors to register a franchise offering or make any initial or annual filing before offering franchises in the state. However, Kentucky does have a process for franchisors to claim an exemption from registering as a business opportunity. Claiming a franchise opportunity exemption is a simple process, but it is important for franchisors to follow this process before offering and selling franchises in the state. Once the exemption is recognized by Kentucky, a franchisor can safely do business in Kentucky by offering franchises through a valid franchise disclosure document. Of course, all franchisors must comply with federal franchise law.
The Exemption Process
To claim an exemption, Franchisors file an affidavit of business opportunity exemption with the Commonwealth of Kentucky Office of the Attorney General and provide a copy of the franchise disclosure document “FDD”. The process is simple and straight forward. Kentucky is typically very quick to recognize an exemption. The request can occur through email and a letter acknowledging the exemption is mailed upon acceptance. Kentucky makes offering and selling franchises easy.
Who qualifies for the exemption?
All franchisors are exempt from registration as a business opportunity in Kentucky so long as the franchisor’s business offering meets the definition of a franchise as defined in the Federal Trade Commission’s Regulation on Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures, as defined in 16 C.F.R. 436 et seq. Other business opportunity states require a federal trademark or other exception for a registration exemption to apply. Kentucky does not require the franchisor to have a federally registered trademark or meet any other criteria except for being a franchise.
The Definition of a Franchise under federal law
Qualifying for the Kentucky franchise exemption is based on the definition for a franchise provided in the Federal Franchise Rule.
Under the Franchise Rule, Franchise means any continuing commercial relationship or arrangement, whatever it may be called, in which the terms of the offer or contract specify, or the franchise seller promises or represents, orally or in writing, that:
(1) The franchisee will obtain the right to operate a business that is identified or associated with the franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark;
(2) The franchisor will exert or has authority to exert a significant degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation; and
(3) As a condition of obtaining or commencing operation of the franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate.
What Federal Laws Effect Franchises?
Franchise opportunities are regulated on the federal level through the federal Franchise Rule. The rules imposed by federal law apply to all states and provinces in the United States. We provide an overview of federal franchise law. There are a few basic things that anyone considering a franchise, or considering becoming a franchisor, must know.
The offer of a franchise opportunity can only occur through disclosure of a franchise disclosure document (the “FDD”). The requirements for disclosure documents are laid out in the federal franchise rule and cover 23 separate items. The FDD must be provided and receipt must be acknowledge.
The franchise rules require a 14-day waiting period between the prospect receiving the FDD and signing any agreement or exchanging any funds. The rule requires these periods to ensure prospects have sufficient time to evaluate any franchise opportunity.
In addition to the 14-day waiting period, franchisors are required to observe a 7-day waiting period if there are certain changes made to teh franchise agreement. In practice, many franchisors observe this period after producing the final agreement.
How do Franchise Attorneys Help Franchisors and Franchisees?
Franchisor Support
Our franchise attorneys support franchisors nationwide providing reliable and readily accessible legal guidance. We represent franchisors and provide ongoing legal support. We works with small business owners planning to franchise and work with leaders in franchising. Big or small, every client matters and will get the priority and attention they deserve. Prompt and reliable legal advice – on demand.
Franchisor legal services include:
- Developing and implementing a plan to franchise
- Drafting the franchise disclosure document (the “FDD”)
- Drafting the franchise agreement and all franchise contracts
- Securing franchise registration in Virginia and across the U.S.
- Disclosing prospects and sending franchise agreements
- Managing and resolving franchise disputes
- Providing day-to-day franchise legal support
How much does a franchisor lawyer cost?
Once we know a little about your business, we will provide a flat fee to develop the FDD. We often serve existing franchisors on a monthly basis for a fixed monthly rate.
Franchisee Support
Our franchise attorneys understand what matters to franchisors because we work with leading franchisors, franchise sellers, and franchise consultants on a daily basis. We leverage this industry knowledge and experience to help clients who are considering the purchase of a franchise opportunity before they sign a franchise agreement.
Franchisee legal services include:
- Nationwide and Virginia FDD review
- Nationwide and Virginia franchise agreement review
- Comprehensive franchise legal review report
- Consultation and legal advice on rights and obligations
- Consultation and negotiation on business legal terms
- Direct dispute resolution and litigation
- Day-to-day legal support
How much does a franchise lawyer cost?
We provide a comprehensive FDD review and unlimited consultation for a competitive flat fee ($1,850). We can assist on other projects at an agreed fixed cost or our hourly rate.
