Franchising in West Virginia
West Virginia Franchise Law
Buying or Selling a Franchise
Franchising is an excellent growth strategy for entrepreneurs looking to expand an existing business and presents a unique opportunity for franchisees to operate their own business under the franchisors brand and system. The offer and sell of franchises are regulated under federal law and to various degrees within the 50 states. These laws effect how and when the franchisor can sell and they effect the rights afforded to franchisees.
Is West Virginia a Franchise Registration State?
West Virginia is not a franchise registration state. In fact, there are no franchise specific laws in the state. As a non-registration state, franchisors can offer and sale franchises in the state once they have issued a Franchise Disclosure Document in compliance with the federal Franchise Rule. This means there are no franchise specific protections at the state level for West Virginia residents looking to purchase a franchise opportunity.
Keep reading to learn more about franchising and how a franchise attorney can help you franchise or purchase a franchised business.
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Federal Franchise Law Applies in All States
Federal Franchise Legal Requirements
The federal Franchise Rule establishes the minimum requirements for franchisors to follow when offering or selling franchises in the United States. Federal laws apply in every state regardless of where the franchisor or franchisee is located. Federal laws prescribe the content of disclosures and establish the minimum rules surrounding the sales process. However, there is no federal franchise registration process or requirement. Thus, the federal government does not review the content of a franchisors disclosure document. Enforcement is largely left to state regulators and franchisees who bring law suits.
Franchise Registration and Disclosure
A franchise opportunity can only be offered through disclosure of a franchise disclosure document (the “FDD”). Thus, the FDD is the primary legal document required by all franchisors. This disclosure document must be prepared before offering franchise opportunities in any state and before the registration process can begin. Each FDD contains 23 separate ares of disclosure known as “Items”. The disclosure includes a standard franchise agreement, along with any other contracts required to be signed by the franchisee to begin operating a franchised business. The federal requirements and content of the disclosure document are more thoroughly explained in our federal law resource guide.
Purpose of the FDD
As a franchisor, maintaining compliance and establishing expectations is essential to building a successful franchise system. The FDD discloses aspects of the business and establishes the ground rules for the franchise relationship. As a prospective buyer, the Items in the FDD are designed to help you make an informed purchasing decision before you sign a franchise agreement. Understanding the contents is essential when conducting due diligence.
What is a Franchise?
These three elements make a franchise a franchise
Right to Operate
The buyer will obtain the right to operate a business that is identified or associated with the seller’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark
Degree of control
The seller will exert or has authority to exert a significant degree of control over the buyer’s method of operation, or provide significant assistance in the buyer’s method of operation
Exchange of money
As a condition of obtaining or commencing operation of the business, the buyer makes a required payment or commits to make a required payment to the seller or its affiliate. In Virginia, this includes any direct or indirect payment of at least $500.
Franchising Occurs When An Oral Or Written Deal Satisfies Each of These Elements
The Role of a Franchise Attorney
helping Franchise Buyers
- 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 across the United States.
- Disclosing prospects and sending franchise agreements
- Managing and resolving franchise disputes
- Providing day-to-day franchise legal support
Helping Franchise Sellers
- Nationwide FDD review
- Nationwide 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
- Day-to-day legal support
