Arkansas Franchise Law and FDD Registration

Arkansas Franchise FAQ’s

Is Arkansas a Franchise Registration or Filing State?

No, Arkansas is not a registration state and it is not a franchise filing state.

Does Arkansas Regulate Franchises?

Yes, it does. Arkansas has passed and enacted franchise relationship laws that govern the relationship between franchisors and franchisees. These franchise relationship laws are known as the Arkansas Franchise Practices Act. So, while Franchisor’s are not required to pre-register or file their FDD with an Arkansas state regulator, they must nevertheless ensure that they comply with the Arkansas Franchise Practices Act.

What Is the Definition of a Franchise Under Arkansas Law?

Under the Arkansas Franchise Practices Act, a franchise is defined as follows:

“Franchise” means a written or oral agreement for a definite or indefinite period in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic within an exclusive or nonexclusive territory or to sell or distribute goods or services within an exclusive or nonexclusive territory at wholesale or retail, by lease agreement, or otherwise.

The Arkansas definition is expansive in that it focuses on a trademark and the grant of a territory. However the statute does create exemption for traditional retail type businesses that lack a degree of control over the merchandising activities of the store.

What Does the Arkansas Franchise Practices Act Regulate?

As franchise relationship law, the Arkansas Franchise Practices Act is focused on protecting franchisees and affording franchisees certain rights when it comes to the franchisor/franchisee relationship. Some of the areas where this act expands on the rights of franchisees include:

• Termination and Non-Renewal – To terminate, cancel, or fail to renew a franchise, a franchisor must possess “good cause” and provide the franchisee with 90 days advance written notice of the franchisor’s decision and reasons for cancelling, terminating, or not renewing the franchise agreement.

• Transfers and Assignments – Franchisees are required to provide franchisors with written notice of the franchisee’s intention to transfer or assign the franchise agreement. This notice is important as it then triggers an obligation on the franchisor to approve or disapprove of the franchisee’s request within 60 days of the franchisor’s receipt of the franchisee’s notice. If the franchisor disapproves, the franchisor must provide the franchisee with specific reasons for the disapproval.

The Arkansas Franchise Practices Act includes a number of additional protections for franchisees. Most important the Act creates private rights of action and remedies for material omissions, false and misleading information given during the franchise sales process. Also franchisor liability exists if the franchisor terminates a franchise without good cause and such liability may extend to a franchisor’s obligation to repurchase a franchised outlet.