Maine is classified as a business opportunity state, and its laws relating to the sale or offering of business opportunities are found under its Regulation of the Sale of Business Opportunities Law, Me. Stat. tit. 32 §§ 4691 et seq. (the “Business Opportunity Law”). The Business Opportunity Law defines “business opportunity” as the sale of goods, services, products, etc. to a purchaser for an amount that exceeds $250, for the purpose of enabling the purchaser to start a business, and in which the seller represents to the purchaser one of the five enumerated representations under § 4691(3)(A).
Most franchises will constitute a “business opportunity” under the Business Opportunity Law; particularly, under § 4691(3)(A)(5), which provides that when a seller represents that it, or an affiliated person, will provide a sales or marketing program to the purchaser, the offering constitutes a business opportunity. However, if a franchise offering qualifies as a business opportunity only under § 4691(3)(A)(5), and not under any of the other qualifiers in § 4691(3)(A)(1)-(4), then the franchise offering does not constitute a “business opportunity” if it is a marketing program made in conjunction with the licensing of a federally registered trademark or service mark. Thus, if a franchisor offers franchise in Maine in conjunction with a trademark registered with the United States Patent and Trademark Office (USPTO), the franchisor is exempt from the requirements of the Business Opportunity Law and does not need to file any additional documentation with the state.
Maine franchisors without a federally registered trademark or service mark, or whose franchise offering otherwise qualifies as a business opportunity under § 4691(3)(A)(1)-(4), are subject to the requirements of the Business Opportunity Law and must register their franchise with the state before offering, selling, advertising, or undertaking any act to promote their franchise in the state. To validly register with the state under the Business Opportunity Law, a franchisor must do the following:
And Maine franchisors must renew their registration annually by paying a $10 filing fee, filing a current copy of a disclosure document meeting the criteria in (2) above, and providing evidence of a surety bond or escrow account meeting the criteria in (3) above.
Regardless of whether a franchisor is exempt from the Business Opportunity Law by offering franchises in conjunction with a federally registered trademark, all Maine franchisors are nonetheless required to disclose a validly issued Franchise Disclosure Document (FDD) prior to entering into a franchise agreement or accepting any payments from a franchisee, and to comply with other federal franchise regulations set forth in the FTC Rule.
It is critical that franchisors are aware of the substance and effect that the Business Opportunity Law, as well as the FTC Rule, has on business operations and relationships in Maine. A franchise attorney is an excellent resource to provide clarity to applicable Maine franchise laws and registration provisions and to ensure compliance on an ongoing basis. For Maine franchisors without a federally registered trademark, failing to register a franchise as a business opportunity with the state, or even failing to renew such registration, could result in penalties imposed by the state, liability in civil actions filed by franchisees, and other substantial losses. To help avoid these negative ramifications, contact a seasoned franchise lawyer today and start working on franchising your business.