The State of Wisconsin Department of Financial Institutions oversees the sale of franchises in Wisconsin. Anyone selling a franchise in the state must register with the Department’s Division of Securities and comply with other state and federal requirements.
Franchisors must thoroughly and carefully prepare all registration documentation, particularly the franchise disclosure document, commonly known as an FDD. A franchise attorney could assist with compliance with Wisconsin franchise law and registration, including amendments, and de facto renewals.
Wisconsin charges an annual fee of $400 to register a franchise. The state accepts payment by electronic check or via certain major credit cards. The fee to file an amendment to a registration is considerably less at $200. However, an amendment does not extend the life of a registration, so the registration will still expire on the original date.
Wisconsin law does not provide for the “renewal” of a franchise registration. Instead, franchisors must re-register if they wish to continue to sell franchises in the state. Because the re-registration is not a renewal, it is permissible to have a gap in time between the expiration of one registration and the start of a new one, so long as the franchisor does not sell any franchises during the period when there is no valid registration on file. The registration becomes effective upon receipt by the Division of Securities.
Franchisors must submit various documents to the Securities Division online at https://www.wdfi.org/apps/franchiseefiling/. Required information includes:
It is vital to pay attention to specific requirements regarding necessary information. For instance, the franchise disclosure document and all attached exhibits must be submitted as a single PDF document. Uploading an incorrect or incomplete version of the FDD may incur additional expenses and unnecessary delays. By working with an attorney who is experienced in legally building franchises, franchisors could be certain that their application is completed properly so they are able to start business as soon as possible.
Wis. Stat. §553.22 describes franchise sales transactions that are excluded from the registration requirements, and subsequent statutes describe sales that are exempted from these obligations. Sales are excluded if they involve a relationship where the franchisee has been in the business for more than two years and sales accounting from the relationship are expected to amount to no more than 20 percent of gross sales revenue of the franchisee for at least a year. Associations of agricultural producers or organizations operated on a cooperative basis by independent retailers selling goods and services to their own members are also excluded.
Other exempted transactions include private franchisee and sub franchisor sales and transactions involving experienced franchisees. For the experienced franchisee exemption, the sale must involve a cash payment of at least $100,000 and that amount must constitute no more than 20 percent of the franchisee’s net worth. Moreover, the franchisor must reasonably believe the franchisor has sufficient knowledge to evaluate the risks of the franchise investment. Exemptions must still be assessed on a case-by-case basis, and franchisors must file for and obtain approval of an exemption. This can sometimes be a more arduous process than simply registering the franchise offering with Wisconsin.
Mistakes in franchise registration or operation may subject a franchisor to civil liability. Accordingly, many franchisors find it beneficial to consult a franchise focused business legal team for guidance when registering or making strategic decisions.
State lawmakers established the Wisconsin Franchise Investment Law and related regulations to protect potential franchisors and ensure that they have full and accurate information to enable them to make an informed decision before investing in a franchise. Franchisors should be aware of these Wisconsin franchise law and registration provisions to better protect their brand’s interests. Call now to schedule a consultation.