DFI’s Securities Division offers the following tips in the preparation of a franchise renewal application:
- Submit your application online. Applications for franchise registration, renewals, and amendments, as well as applications for franchise broker registration and franchise exemption notice filings, must be made electronically through our online franchise filing system. We no longer accept physical submissions for these types of filings.
- Follow NASAA’s new guidelines for the FDD State Cover Page and Effective Date Page. These requirements are effective Jan. 1, 2020. For more information, see NASAA Cover Sheet instructions.
- Disclose assurances of discontinuance. If an assurance of discontinuance is material, it must be disclosed to prospective franchisees. For more information, please see our notice at https://dfi.wa.gov/sites/default/files/notice-regarding-disclosures-aod.pdf.
- Ensure compliance with Washington’s new law restricting non-compete agreements. On May 8, 2019, Washington’s Governor Jay Inslee signed ESHB 1450 into law, which restricts the use of non-compete agreements in Washington. Notable changes include: (1) an employee non-compete covenant is unenforceable unless the employee’s annual earnings exceed $100,000; (2) a presumption is created that any non-compete covenant with a duration longer than 18 months is unreasonable and unenforceable; and (3) a franchisor may not restrict, restrain, or prohibit a franchisee from soliciting or hiring any employee of the franchisor or a franchisee of the same franchisor.
- Ensure financial performance representations follow the FTC Rule and the NASAA Commentary. The Division will continue to carefully review financial performance representations to monitor compliance with the FTC Rule and the NASAA Commentary on Financial Performance Representations. Franchisors and their counsel can expect to receive comments regarding financial performance representations that include misleading subsets of franchise outlets, disclaimers, and blank worksheets.
- Remember Washington’s franchise broker registration requirement. Please remember to submit the Franchise Broker Appointment Page for each broker acting on behalf of the franchisor in Washington. If the franchisor does not plan to use franchise brokers in Washington, it is helpful to include a statement in the application cover letter confirming that the franchisor will not use franchise brokers in Washington or that the franchisor will provide a Franchise Broker Appointment Page before later using a broker in Washington.
If you have any questions about these requirements or other issues, please contact Trang Pham at 360-902-8738 or firstname.lastname@example.org.