New York is a franchise registration state. So, you must register your FDD with the Investor Protection Bureau of the New York Attorney General prior to offering or selling franchises in the state. New York charges a $750 fee for the initial registration application and a $150 fee for renewal applications, which must be done annually within 120 days of the franchisor’s fiscal year end. More information can be found on the New York Attorney General’s Website.
What Qualifies as a Franchise in New York?
The New York Franchise Sales Act defines a franchise as an agreement in which a franchisee is granted the right to offer, sell or distribute goods or services under a marketing plan or system prescribed by a franchisor, and the franchisee is required to pay a franchise fee. The definition also includes agreements in which the franchisee pays a franchise fee and is granted the right to offer, sell or distribute goods or services associated with the franchisor’s trademark, service mark or other commercial symbol.
What Franchises Must Register in New York?
New York has the broadest jurisdictional reach of any registration state. Specifically, the Act states that it governs all franchise sale activity that takes place “in this state,” and this has been construed to include all offers or sales of franchises consummated in, emanating from, or directed to New York. Therefore, New York based franchisors should know that they will always be expected to register in New York, because any offer they make will be deemed to have “emanated” from New York. The location and residency of the franchisee is largely irrelevant, and there is no exemption for scenarios in which the franchisee and franchised business are both out of state. The law is so overarching that even a meeting between a Virginia franchisor and a potential Connecticut franchisee to discuss the sale of a franchise at a coffee shop in New York, would likely be considered franchise sale activity taking place in the state.
Additionally, franchisors that are not registered in New York must proceed with caution when advertising the sale of their franchises online, as those may constitute an illegal offer when viewed by a prospective franchisee in New York. However, the New York State Franchise Regulations state that a franchisor can avoid such a violation if the internet advertisement: (i) indicates that the franchise is not being offered to New York residents; (ii) is not directed to any person in New York by or on behalf of the franchisor or with the franchisor’s knowledge; and (iii) the franchisor registers their franchise in New York prior to selling any franchises there.
How Do I Register My Franchise in New York?
As of October 1, 2022, all applications in New York must be submitted through NASAA’s Electronic Filing Depository, and should include:
As part of its FDD, franchisors must also submit audited financial statements – unaudited financial statements may be used on an interim basis. After submitting your application, the state must respond within 30 days either accepting the filing, or more likely, request adjustments or additional disclosures be made. This can cause the application process to take a significantly longer amount of time, so it is best to have everything as complete as possible when submitting the application.
How Do I Renew My Registration?
You didn’t ask “if” you needed to renew your registration…smart! You must renew your registration every year and must submit your renewal application within 120 days from the end of your fiscal year. If you do not submit your renewal application on time, you may have to file a new initial registration application.
For renewal applications, you must submit the Uniform Franchise Registration Application with Certification form, the Franchisor’s Costs and Source of Funds, one clean copy of your FDD and one redlined copy showing changes from the previous year, the $150 renewal fee, and a document with the following information:
How Do I Make Amendments to My Registration?
Franchisors must “promptly” file amendments to their registrations after material changes are made. An amendment application must contain the Uniform Franchise Registration Application with Certification form, the Franchisor’s Costs and Source of Funds, one clean copy of your FDD and one redlined copy showing the changes, and the $150 amendment fee. The state provides some examples of what it considers to be material changes, including: