As the coronavirus spreads across the U.S., the federal and many state governments are providing relief to businesses by extending the deadlines on various filings. Among the areas receiving attention are state registration and filing deadlines for franchisors.
Franchise Disclosure Documents (FDD) must be prepared and updated annually within 120 days after the franchisor’s fiscal year end under the FTC Franchise Rule. Franchisors that ended their fiscal year in December must update their FDDs before the end of April. In addition, some states have their own registration and filing obligations before a franchise can be sold within the state and then renewed annually. State requirements vary. Some mirror the FTC 120-day rule; others require renewal within a year of the franchisor’s initial registration. Depending on the state(s) in which the franchisor offers and/or sells franchises, the annual renewal filings must be made within 90 to 120 days following the end of the franchisor’s fiscal year or prior to the anniversary of the effective date of the franchise registration.
While many franchisors are likely concerned about complying with due dates because of upheaval in their business, states are starting to provide assurances of extra time. For example, in New York, deadlines for registration renewals, amendments, and other filings have been extended. In addition, a franchisor that is filing a franchise registration renewal or an amendment may offer, but not sell franchises, while the IPB reviews the application. New York is also working on implementing new electronic filing procedures to improve operations.
Similarly, Maryland announced that it is continuing to accept and process franchise registration applications as they are received although the staff is working remotely. In addition, the state is granting an automatic extension of the effective dates of franchise registrations and exemptions of effective franchise offerings in Maryland that would otherwise have expired during its state of emergency. A franchisor whose Maryland registration is extended during this emergency period may continue to offer, but not sell a franchise under certain conditions, if the franchisor provides to prospective Maryland offerees an updated FDD that complies with the FTC Franchise Rule.
Virginia has also announced an extension of the deadline for registration and exemption renewals. California has not extended its due dates but has waived the additional $225.00 filing fee through June 30, 2020 for franchise renewals that are filed after the franchise registration has lapsed. Ideally, other states will provide similar relief to franchisors, but it should not be assumed that they will. Best practice is to check with each state in which you are required to register, renew, or file as soon as possible since many deadlines are coming up quickly.
If you are unsure of what you need to do or you will not be able to meet a deadline, contact Lusthaus Law for assistance.