Maybe you’re opening the newest location of a business that has already been market tested and approved. Or maybe you’re a franchise salesman, a business broker, or an entrepreneur with a growing brand. Franchisees and franchisors share something big in common: both want success to unfold around them, because both have much at stake!
If you’re franchising or opening a franchised business, here’s a free tip from a franchise lawyer: honor your contracts, and expect the same in return. Gerry Wells, COO of Rita’s Italian Ice and Frozen Custard (a franchising company that inherited its previous ownership’s 11 lawsuits), summed up the best reason to avoid franchise litigation in an interview with Franchise Times:
“We don’t believe that litigation benefits anyone, and it’s disruptive for everybody. It’s costly for everybody, and it’s just something we would like to avoid.”
“Costly for everybody.” That sums litigation up nicely. But when franchise disputes are unavoidable, make sure you have an experienced business law attorney on your side.
Utah Laws Franchisors Should Know
Here is another invaluable legal tip: whatever you do, do it legally. Franchising is no exception to that rule.
California and New York are both examples of franchise registration states. If you offer or sell a franchise in either, you must pay an initial fee of $675 or $750 respectively. Utah is not a franchise registration state, but that does not mean it is fee-free. Governor Spencer J. Cox officially defined franchises as business opportunities when he signed the Business Opportunity Disclosure Act of 2022, thus making Utah a franchise filing state.
Utah Code Section 13-15-201 has an important requirement for anyone who would sell or offer business opportunities in Utah: they have to file a Notice of Exemption with the Utah Division of Consumer Protection. So long as the franchisor has a current and valid Franchise Disclosure Document, filing Notice of Exemption allows them to claim business opportunity registration exemption.
How much does the Utah exception filing fee cost? Much less than California or New York at $100. But here is the catch: you must submit a new Notice of Exemption and pay another $100 filing fee every year. The Utah Division of Consumer Protection website is the easiest (and only) way to do it. You can renew your current exemption within 90 days of its expiration date.
A final note. Are you specifically franchising a bank or other financial institution? Then you had better pay the Utah state franchise tax as well!
Utah Laws Franchisees Should Know
If you’re considering opening a franchised business in Utah, then you may wonder whether the franchisor can terminate your franchise agreement at will. After all, their doing so would essentially delete all your hard work.
Utah Code Section 13-14-301 allows a franchisor to terminate or refuse to continue a franchise agreement under the following conditions (and we paraphrase):
- They give written notice to the franchisor 60 days before the date of termination;
- They have good cause for the termination; and
- They comply with Utah Code Section 13-14-307, which includes making a payment to the franchisee.
Federal franchise laws apply to Utah just like they do every other state. The federal government’s Franchise Rule requires franchisors to give any potential franchisee a disclosure document. That document details material information about the offered franchise, as well as its officers and other franchises. The Franchise Rule gives prospective buyers information they can use to objectively assess the franchise’s promise as an investment opportunity.
Do you need a franchise lawyer in the greater Logan, UT area? Don’t google “franchise lawyer near me.” Contact Hillyard, Anderson & Olsen instead! Our attorneys are standing by to represent you in any franchising matter, no matter which side of the business arrangement you happen to occupy.
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