Indiana is unique in that it has established an online service known as the Securities Portal to file franchise registrations and submit other documentation to the Indiana Securities Division. Franchisors who want to market a franchise program to others in the state must comply with Indiana franchise law and registration requirements, including the use of the Securities Portal.
To ensure that obligations are properly fulfilled, many business owners find it helpful to work with a franchise law attorney during the registration or renewal process. If a renewal is not completed according to guidelines within the allotted timeframe, a franchisor may need to begin the registration process from scratch and pay the higher initial filing fee rather than the discounted renewal fee. Working with a legal team that has experience running the legal compliance side of franchising could help ensure that your franchise network runs smoothly, keeping your revenue flowing.
The process of starting a franchise is complex, requiring many distinct steps that must all be done correctly or the application may be denied. Additionally, the process of registering a franchise is not without cost.
Indiana charges an initial filing fee of $500 for franchise registration. The fee for renewals is reduced to $250, but renewals must be received before the previous registration expires in order to be accepted. Registrations remain valid for one year from the date the application is received. Along with the initial franchise registration, a franchisor must submit:
These documents and the filing fee must be submitted to the Secretary of State Securities Division through the Indiana Securities Portal. After January 1, 2020, all registration documentation must be conducted through the online portal.
Indiana laws define terms related to franchises, establish requirements such as registration, and prohibit fraudulent practices related to franchise relationships. A “franchise” is defined in Ind. Code Ann. §23-2-2.5-1 as an agreement that gives a franchisee the right to dispense goods or services under a system created by a franchisor for a fee and using the franchisor’s service mark, trade name, or any other commercial symbol associated with the franchisor. Sometimes, businesses operate in ways that unintentionally establish a franchise relationship, meaning the business must comply with registration requirements and franchise operating laws.
Some of these operating laws come from the Indiana Deceptive Franchise Practices Act, which describes many of the prohibited practices in franchise relations. For instance, franchisors cannot require a franchisee to agree to a non-compete clause with a duration longer than three years or a size greater than the exclusive area specified in the franchise agreement. In addition, franchisors may not establish their own outlets engaged in business that is substantially similar to that of the franchise inside the territory granted exclusively to that franchisee. These regulations are in place to ensure that franchised businesses are given a fair chance at success for both franchisor and franchisee.
Franchisors have to comply with state and federal franchise requirements, and the first step toward compliance is to be aware of these laws and understand how they affect business operations and relationships. A franchise attorney could help explain applicable Indiana franchise laws and registration provisions and work to ensure compliance on an ongoing basis.
Registration and renewal processes need to be completed correctly, and the terms of agreements must fit with state and federal guidelines. Failure to comply could result in penalties and liability in civil actions filed by franchisees as well as other substantial losses. To help avoid the negative ramifications of these violations, contact a seasoned franchise lawyer today and start working on franchising your business.