The outbreak of COVID-19 has had a significant impact on every sector of the economy, including franchising. In some states, the government directives ordering restaurants and other businesses to close for all orders except take-out and delivery has resulted in many franchised businesses going dark with no re-open date in sight.
Many franchisors are busy this time of year updating their Franchise Disclosure Documents (FDD) before the state and federal deadlines render their FDDs stale and unable to be used to disclose prospective franchisees. In the past week, in response to the COVID-19 outbreak, several franchise registration states have extended their filing deadlines for FDDs. We can reasonably assume that other registration states will follow.
Below is a list of the notifications promulgated by state agencies regarding their delayed FDD filing deadlines. We will update this list on an ongoing basis to create a one-stop resource for important franchise-related information.
California: On March 22, 2020, the California Department of Business Oversight issued a notice announcing that it was waiving the $225 filing fee for franchise renewals that are filed after the registration has lapsed through June 30, 2020. The Department also announced that it would accept documents filed on DocQNet, and that such filings would not require notarization of signatures.
Hawaii: On March 29, 2020, the Hawaii Department of Commerce and Consumer Affairs’ Office of the Securities Commissioner announced that franchise filing deadlines would be extended to April 30, 2020.
Illinois: The Illinois Office of the Attorney General granted franchisors whose registrations or exemptions are due to expire between April 1, 2020 and June 1, 2020, a 60-day extension from their anniversary date to file a renewal application without penalty.
Indiana: On April 7, 2020, the Indiana Securities Commission issued an administrative order granting an extension to June 30, 2020, for any franchise registration that was set to expire between March 16, 2020, and May 31, 2020. The administrative order may also be found here.
Maryland: The Maryland State Securities Commissioner issued an Order on March 17, 2020, granting franchisors an extension of 30 days following the date on which the Governor of Maryland declares an end of the Coronavirus State of Emergency in which to file the FDD. The Order allows a franchisor whose Maryland registration is extended during this emergency period to continue to offer (but not sell) a franchise under certain conditions, if the franchisor provides to prospective Maryland offerees an updated FDD that complies with the FTC Franchise Rule. In addition, Maryland will accept most of the filing documents on a CD-ROM; however, a paper cover letter or application page and a paper check are still required. The language of the full Order can be found here.
Minnesota: On March 30, 2020, the Minnesota Commerce Department extended the deadline to June 30, 2020, for franchise filings that were due on April 30, 2020. Franchisors are strongly encouraged to submit annual reports via the online e-file system found here.
New York: On March 24, 2020, the NY Office of the Attorney General announced that it was granting a 90-day extension of any franchise registration renewal or amendment that would have been due between March 1 and April 30 (the Relief Period). A franchisor that is registered or has been granted an exemption, but whose registration or exemption is due to expire is granted an extension of that registration or exemption during the Relief Period. Notably, during this extension, a franchisor that is filing a renewal of or amendment to its franchise registration may offer, but not sell, franchises.
North Dakota: The North Dakota Securities Department granted to franchisors registered in the state a 30 day extension to complete their franchise renewal filing requirements. Filings may be submitted via email (one filing per email). A copy of the filing cover letter must be mailed along with the filing fee check to the Securities Department office.
Virginia: On March 17, 2020, the State Corporation Commission of Virginia issued an Order extending current franchise registrations and exemptions that would have expired between March 16, 2020, and April 6, 2020, by 21 days. The Order indicates that if the COVID-19 emergency continues, one or more additional extensions may be granted. The language of the full Order can be found here. On April 2, 2020, the State Corporation Commission of Virginia issued a supplemental Order further extending the registration extension granted by its March 17, 2020 Order. Registration deadlines are now extended through the pendency of the State’s Judicial Emergency Declaration.
Washington: On March 20, 2020, the Washington Department of Financial Institutions announced that it was waiving any notary requirements on filings at this time. On April 8, 2020, the Department announced it was lowering the fee from $600 to $100 for all franchises whose registrations with the state lapsed that are filing applications for new registrations as a result of that lapse.
For more information about FDDs in your state, please contact Lynne Hanson, Co-Chair of the Franchise and Distribution Group or Niki Vinod Schwab.
Post updated April 8, 2020.
This article originally published in QSR Magazine.
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