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Division of Securities & Retail Franchising


FAQs - Franchises

1. What do I need to know before buying a franchise?

2. Can a franchisee negotiate the terms of a franchise agreement in Virginia?

3. When must a franchise be registered?

4. Are Virginia's franchise disclosure requirements different from those in the FTC Franchise Rule?

5. Does a franchisor need audited financial statements to register in Virginia?

6. When should a franchise renewal application be filed?

7. Can a franchisor renew the franchise early?

8. When should a franchise amendment be filed?

9. If a franchisor is insolvent, can its franchise be registered in Virginia?

 

 

 

 

 

1. What do I need to know before buying a franchise?

A. If you are considering an investment in a franchise, you should call us at (804) 371-9051 or email us at SRF_General@scc.virginia.gov to determine whether a franchise is registered in Virginia or to obtain a copy of the Franchise Disclosure Document. If the franchise is not registered in Virginia, this should alert you that the company may not be in compliance with franchise laws.

For more information about franchise investments, visit the Federal Trade Commission’s websiteExternal Link logo and read the brochure entitled 'A Consumer Guide to Buying a Franchise'.

You should always check with us to provide you with any information about the franchise you are considering investing in and the people behind it.

2. Can a franchisee negotiate the terms of a franchise agreement in Virginia?

A. Yes. Please refer to §13.1-565 (b)External Link logoof the Code of Virginia.

3. When must a franchise be registered?

A. A franchise must be registered or exempted from registration prior to offering to sell or selling a franchise. §13.1-560External Link logo

4. Are Virginia's franchise disclosure requirements different from those in the FTC Franchise Rule?

A. Yes, there are few notable differences. Unlike the FTC Franchise Rule, which in some cases permits a start-up franchisor to use unaudited financial statements in its FDD, Virginia requires a start-up franchisor to include an audited opening balance sheet, at a minimum. Please refer to Item 21 of 21 VAC 5-110-95External Link logo.

The uniform state cover page adopted by the North American Securities Administrator’s Association must also be included in the franchisor’s FDD. Please refer to 21 VAC 5-110-55External Link logo.

5. Does a franchisor need audited financial statements to register in Virginia?

A. Yes. All franchisors, established or start-up, must file audited statements. Please refer to 21 VAC 5-110-95 External Link logo .

6. When should a franchise renewal application be filed?

A. You should file renewal applications 30 days prior to the expiration date.

7. Can a franchisor renew the franchise early?

A. Yes, by submitting Form E and requesting an early renewal date. If the franchisor does not meet the conditions of Form E, please contact the Division to discuss early renewal alternatives.

8. When should a franchise amendment be filed?

A. You should file an amendment application within 30 days of a material change to the FDD.

9. If a franchisor is insolvent, can its franchise be registered in Virginia?

A. Maybe; one possibility is the franchisor may submit financial statements of its affiliate. The affiliate must meet solvency requirements and absolutely and unconditionally guarantee the performance of the franchisor by submitting Form F .

Another possibility may be the Commission may require as a condition of registration or renewal of registration: the escrow or deferral of franchise fees and other funds paid by the franchisee to the franchisor until the franchisor’s pre-opening obligations are fulfilled.