Franchising in Wisconsin
Wisconsin Franchise Laws
Growth through franchising
Franchise is an excellent growth strategy for entrepreneurs to deploy when seeking to grow their own business or launch a new venture. Under the franchise business model, a company (the franchisor) grants the right to use its brand, business system, and support to an independent operator (the franchisee) in exchange for fees and royalties. When deployed successfully, franchising creates a mutually beneficial relationship that promotes business growth and stability for both the franchisee and franchisor.
Is Wisconsin a Franchise Registration State?
Yes, Wisconsin is a franchise registration state. This means franchisors cannot offer or sale franchises in the state unless they first register the franchise disclosure document with the Department of Financial Institutions. Fortunately, the state of Wisconsin makes franchising easy for franchisors and prospective franchisees. In fact, they maintain one of the easiest systems in the country for filing and located franchise disclosure documents.
The Wisconsin Franchise Portal
The Department of Financial Institutions maintains an easy to use website portal for (i) registering new franchise opportunities, (ii) filing a franchise amendment filing, (iii) searching for any registered franchise opportunity, and (iv) searching a compiled list of all franchises registered in the state. You can view the portal here. This tool is used by prospective franchisees across the country to pull brands franchise disclosure documents before talking to sales reps. Likewise, franchisors often use this portal to locate disclosure documents as part of their market research efforts. There are currently over 1.700 franchise disclosure documents active and on file in the state.
At the state level, franchising is regulated under the Wisconsin Franchise Investment Law and Administrative Code.
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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
