Hawaii Franchise Law and Registration

Classification: Registration State

Registration Fee: $250

Renewal Fee: $250

Registration Expiration: 90 days after the end of the fiscal year

Franchising your business could be a great way to introduce another revenue stream and grow your brand, but there are certain elements that must be handled before starting. Potential franchisors must complete all the required aspects of registration before they allowed to sell a franchise in Hawaii. Registration lasts one year and must be renewed with updated information annually. Consulting an experienced franchise lawyer who understands how to comply with Hawaii’s franchise law and registration requirements as well as federal regulations could help you take the initial steps to expand your brand.

The Hawaiian Government and Franchises

Hawaii’s Department of Commerce and Consumer Affairs is composed of several sections, including the Business Registration Division. Within this division, the securities section handles franchise filings and similar issues. The securities section also investigates complaints of possible franchise law and registration violations in Hawaii.

The Hawaiian government uses slightly different terminology than some other jurisdictions regarding franchise law and registration. The state also requires the use of some state-specific forms rather than universal forms. Applications for franchise registration and annual renewals require a $250 fee and should be submitted to:

Department of Commerce and Consumer Affairs

Business Registration Division

335 Merchant Street, Room 203

Honolulu, HI 96813

For the year 2020, Hawaii has reduced the filing fee for state registrations and annual renewals to $125.  If a renewal is not completed according to the state’s regulations or is not completed on time, the franchisor may need to register their franchise as if it were new. Those registering will need to send the following documents and forms, including:

• The Application for Filing of Franchise Offering Circular
• Consent to Service of Process
• Uniform Franchise Registration Application
• A cover letter
• Franchise Seller Disclosure Form
• Costs and source of funds form
• Corporate acknowledgment
• The franchise disclosure document

Exemptions from Registration Requirements

The registration requirements of Hawaii’s Franchise Investment Law do not apply in certain situations. However, these exemptions are more limited than in many jurisdictions.

Under Haw. Rev. Stat. §482E-4, the registration requirements for the sale of franchises do not apply to:

• Transactions conducted by executors, administrators, sheriffs, marshals, receivers, trustees in bankruptcy, guardians, or conservators
• Sales between banks, insurers, investment companies, or other institutions buying in a fiduciary capacity or for their own benefit
• Certain motor vehicle franchises
• A business where the franchisee and the location will be operated out of HI
• Renewals with no changes the in business and franchise relationship
• Sales of additional franchises to a buyer with existing franchises in the same franchisor
• Certain sales of franchises by a franchisee for the franchisee’s own account

In addition, the Director of Commerce and Consumer Affairs may also exempt transactions on a case by case basis.

The Franchise Disclosure Document

The franchise disclosure document (FDD) is a key component in franchise sales. In Hawaiian franchise law and registration procedures, these informational documents are also referred to as “offering circulars.” The Business Registration Division puts out various forms that are required for franchise registration, including an Application for Filing of a Franchise Offering Circular containing specific information about the relationship’s operations. The FDD/offering circular must be filed with the Business Registration Division and a copy must be delivered to prospective franchisees at least seven days before the execution of a franchise agreement payment.

Assistance with Hawaii Franchise Law and Registration

Hawaiian law considers someone a franchisor if they enter into any type of agreement, even implied, that grants another person the right to use a branding mark in exchange for a franchise fee if there is a community interest in the business of providing goods or services for consideration. When someone is a franchisor, they must comply with the Hawaii Franchise Investment Act, including the registration, renewal, and notice requirements. Failure to comply can result in civil penalties or even criminal prosecution, in addition to contractual consequences.

To avoid problems, you may wish to work with an experienced franchise attorney. Hawaii franchise law and registration requirements are far more complicated than many of the federal requirements that apply to franchise sales, but working with someone experienced in the legal complexities of starting a franchise could help. Schedule a consultation today to learn more.