While the COVID-19 pandemic has placed businesses in unprecedented situations, businesses are forced to adapt and replace their operations. In reaction to this monumental business disruption, several states have already begun issuing updated rules for franchise registrations and renewals in hopes of mitigating the effect this pandemic has had on franchisors. These new policies come with the postponement of certain deadlines and adjustments in the form of presentation of programs to the State. Below, we have indexed the new policies as of April 2, 2020:
California
Process changes: California will allow businesses to use DocuSign of physical signatures if the filings are electronic, and encourages businesses to register online. The Business Supervision Department will temporarily suspend overdue fees for franchise renewals and registrations.
Hawaii
Process changes:
The State of Hawaii encourages franchisors filing renewal or initial filings pursuant to Chapter 482E of the Hawaii Revised Articles to register the securities portal online to further facilitate timely review.
Registration and Disclosure Changes:
The State Department of Commerce and Consumer Affairs (DCCA) has extended the deadline for submitting waiver programs to April 30, 2020. The International Franchise Association reports that the state is willing to discuss potential issues on a case-by-case basis.
Illinois
The International Franchise Association reports that Illinois franchise regulators are willing to make possible adjustments to deadlines on a case-by-case basis. The International Franchise Association reports that the state is relaxing enforcement of deadlines, seeking a “good faith” effort, however, those personal rights of action will still apply.
Indiana
The state of Indiana has issued an extension and informed the International Franchise Association that it is willing to work with businesses on a case-by-case basis.
Maryland
Process changes: Applications for registration must be submitted only on CD-ROM, eliminating the requirement to provide paper copies. This CD-ROM must be accompanied by a paper cover letter or application page, and a physical check. on behalf of the “Office of the Attorney General of the Republic”.
Registration and Disclosure Changes: Effective immediately, the Maryland Securities Commissioner granted an automatic extension of franchise registration effective dates and exemptions that would have expired during this state of emergency. During this state, franchisors would possibly continue to offer (but not sell) franchises under certain conditions. The franchisor will be required to provide an updated franchise disclosure document that complies with the FTC’s franchise rule for long-term recipients in Maryland. These updates apply only to franchises filed in the state of Maryland.
Minnesota
Process changes:
The state of Minnesota has temporarily ditched its requirement for notarized signatures.
Registry changes:
Minnesota’s performance was extended and moved from April 30 to June 30.
New York
Process changes:
All bureaucracy submitted on paper or CD-ROM must now also be emailed to: IPBFRANCHISE@AG. NY. GOV
Registry changes:
Franchise renewals expiring between March 1, 2020 and April 30, 2020 have now been extended through July 30, 2020.
Rhode Island
The state of Rhode Island has waived the consequences of registrations due in March or April. The state expects them to post more on its website.
Virginia
Process changes: Virginia Securities and Retail Franchise Division will no longer require shipments to be made with paper copies. Franchisees may submit their Franchise Disclosure Document and application on a CD or USB key along with a Form A request and physical check. Cover the application fee.
Changes to registration and disclosure: The Virginia Supreme Court issued a “judicial emergency declaration” that granted extensions to upcoming registration and waiver deadlines. It announced a judicial emergency declaration stating that any franchise registered or exempt through the Virginia Retail Franchising Act now has been granted a 21-day extension for registration or exemption (“or any other era possibly ordered through CSC or the Virginia Supreme Court”).
South Dakota and North Dakota have the International Franchise Association that can negotiate with franchisors on a case-by-case basis.
Washington
Process changes: Washington has informed the International Franchise Association that it is likely to be working with franchisors on a case-by-case basis.
While it is related to the coronavirus, Washington announced the following additional adjustments to its needs and processes:
· Updated clause. The Securities Division has provided an example of an amendment to the Washington franchise agreement for many years. It updated the wording of the annex in light of the new law prohibiting certain non-compete commitments and non-solicitation agreements (Chapter 49. 62 RCW), as well as updates to Interpretative Declaration No. four of the Franchise Act (see below). Upon renewal, the Division will require all franchisors to adapt their Washington Appendix to the language of the updated Appendix. the date form is on the Washington State website.
. Update of Interpretative Declaration of Franchise No. cuatro – FIS-0four. This interpretation has been updated to explain the Division’s needs in relation to the provisions of franchise agreements that define the arbitration, mediation and/or litigation position. The updated form is located on the Washington State website.
· Updated Franchise Registration Exemption Notice. The Division updated the Franchise Registration Exemption Application Notice for Franchisors based on the Registration Exemption for Franchisors Who Meet Certain Experience and Net Worth Requirements (the Large Franchisor Exemption). -File system. A copy of the updated form can be found on the Washington State website.
While registration states offer limited relief, record, and disclosure rules, the FTC’s franchise rule still applies. As a result, franchisors whose fiscal years ended December 31, 2019 will need to update their disclosure documents within 120 days of the end of their fiscal year. Franchisors will need to update their franchise disclosure documents (adding adjustments needed due to the current coronavirus pandemic) and renew/apply for franchise registrations in accordance with their practices beyond. As required by law and further reinforced through the coronavirus. Pandemic, franchisors will also need to plan to review their information, adding parts 19, 20 and 21, quarterly or more in the following year and fine-tune the disclosure document if necessary.
Finally, all franchisors will need to recognize that they may continue to offer or sell franchises if the transactions are not covered or exempt from franchise disclosure and registration laws.
Allison David, assistant, contributed to this post.