In 2024, we covered the North American Securities Administrators Association’s (NASAA) proposed Model Franchise Broker Registration Act. That proposal became final in May 2026 when NASAA adopted the Model Act, creating a template for states seeking to regulate the third-party brokers and sales organizations that often play a decisive role in franchise sales. This is critical for franchising since brokers have historically been underregulated.
For franchisors and prospective franchisees, the message is clear: the regulatory focus is expanding beyond the franchisor’s Franchise Disclosure Document (FDD) and toward the people who introduce, screen, advise, and sometimes pressure candidates into buying a franchise.
A Closer Look at Filing and Requirements
In franchise registration states, franchisors already must file a Franchise Seller Disclosure Form for each person who may solicit or sell franchises on their behalf in that state. This includes the franchisor’s employees, employees of its parents and affiliates, and third-party brokers. The proposed broker registration requirement would impose a separate obligation: brokers would have to register directly with the state, independently of the franchisor’s filing.
Existing requirements in New York and Washington already reflect this distinction. New York, for example, defines a “franchise sales agent” as a person who offers or sells a franchise on another’s behalf, excluding franchisors, subfranchisors, and their respective employees. Anyone who falls within that definition must file independently; identifying the agent in the franchisor’s seller disclosure filing does not satisfy the agent’s separate filing obligation.
Many registration states, including New York, require franchisors to file sale agent forms for each person who will provide sales services on behalf of the franchisor. That is different from franchise broker registration, which requires brokers to file independently and to pay a fee to the state.
Why Broker Regulation Matters
Franchise brokers may be compensated for locating prospective franchisees, acting as intermediaries between candidates and franchisors, evaluating candidates’ qualifications or suitability, managing prospects, or providing information about franchise offerings. Yet many candidates do not fully understand that a broker’s loyalty, compensation, or incentives may not align with their own.
NASAA adopted the Model Act to address that information gap. Its stated goals are mandatory registration of brokers and their representatives, enhanced disclosure of compensation and litigation or enforcement history, and recordkeeping requirements sufficient to support state audits.
The Model Act would make it unlawful for an unregistered franchise broker to offer or sell a franchise in an adopting state. A broker or broker representative would generally need to file an application, consent to service of process, consent to jurisdiction and venue, and pay the required fee. States could also require an examination or basic education before registration.
Before communicating with a prospective franchisee about a specific opportunity, a registered broker would need to provide a prescribed disclosure statement. The Act also requires brokers and representatives to maintain complete records and accounts relating to franchise offers and sales for five calendar years, with records subject to state examination.
What Franchisors Should Do Now
The Model Act is not itself law in any particular jurisdiction. NASAA develops model legislation that individual legislatures and regulators can adopt, in whole or with modifications. But franchisors should treat it as a strong signal of the direction of franchise regulation.
Franchisors that use brokers, franchise sales organizations, consultants, or referral networks should review their contracts and compliance programs now. Key questions include:
- Are all brokers and their representatives identified, vetted, and contractually required to comply with applicable registration and disclosure laws?
- Do broker agreements prohibit misleading earnings, financial performance, or “guaranteed success” claims?
- Does the franchisor control the broker’s use of its trademarks, FDD, marketing materials, and franchise-specific information?
- Are broker compensation structures disclosed accurately and consistently in broker-facing communications?
- Can the franchisor audit broker records, terminate a noncompliant broker, and supervise lead-generation practices?
Under the Model Act’s prefatory note, franchisors would be expected to use only registered brokers and representatives. Even before adoption in a particular state, franchisors should assume that regulators and plaintiffs’ counsel will scrutinize the conduct of third-party sellers more closely.
New York’s and Washington’s Existing Broker Regimes
New York already requires franchise brokers to register before offering or selling franchises in the state. Under General Business Law section 683.13 and the New York Attorney General’s regulations, a person acting as a franchise sales agent must file a Sales Agent Disclosure Form (UFRA-E) with the New York State Department of Law, and no offer or sale may be made by that agent until registration is issued.
New York’s Franchise Registration Guide also directs franchise brokers to submit a completed Franchise Broker Registration Form to the Attorney General’s Investor Protection Bureau. New York franchisors should therefore not wait for the Model Act to be enacted: their broker network must already satisfy New York’s registration requirements.
Similarly, Washington State franchise brokers must register with the Washington State Department of Financial Institutions (DFI) Securities Division under RCW 19.100.140. It is unlawful to offer or sell a franchise, or for a franchisor to employ a broker, without an active registration.
California’s New—But Not Yet Active—Regime
California has enacted its own broker-registration framework through Senate Bill 919, which amended the California Franchise Investment Law. The law will require most franchise brokers doing business in California to register annually with the Department of Financial Protection and Innovation (DFPI).
However, the DFPI has confirmed that the program is not yet operational. Registration is expected to become available around April 2027, with the requirement becoming mandatory on July 1, 2027. Once active, brokers will need to disclose background information, including business ownership, professional experience, recent legal actions, compensation, and services provided; they will also need to retain franchise-offer records for at least five years.
Practical Takeaways
The NASAA Model Act does not replace New York’s or California’s laws; it provides a potential national baseline that may influence future state adoption. For now, franchisors operating in New York must ensure broker registration compliance, while those selling in California should prepare for the DFPI’s forthcoming registration system.
Prospective franchisees, meanwhile, should ask any broker:
- Are you registered where required?
- How are you paid?
- What brands do you represent?
- And what incentives do you receive for steering me to this particular franchise?
Those questions may become standard practice as state oversight of franchise brokers grows. Because the NASAA Model Act is “model” legislation, it only becomes binding when a state adopts it. Its full text is available here.
But its breadth signals that franchisors should review their broker networks, tighten broker agreements, and verify registration and disclosure compliance. This is particularly prescient in New York, where broker registration is already required, and California, where a broker-registration program has been enacted but is not yet operational.
Franchisors and franchisees should speak with a NY franchise lawyer to help understand their relationships with franchise consultants. Franchise brokers and consultants are also encouraged to reach out to Lusthaus Law to learn more about their potential legal requirements.
Contact Lusthaus Law
Lusthaus Law’s website is a resource for New York franchisors and franchisees. We have published two downloadable and complimentary e-books and our Insights blog is regularly updated to reflect industry trends, legislative updates and recent achievements in client representation.
Contact us today to learn more about how Lusthaus Law P.C. can help you navigate a clear path for your franchise’s successful future.
