Illinois Franchise Law and FDD Registration

Illinois Franchise and FDD Registration FAQs

Who Regulates Franchises in Illinois?

The Franchise Bureau of the Illinois Attorney General regulates and oversees enforcement of the Illinois Franchise Disclosure Act, including mandatory FDD registration requirements and compliance with Illinois’s franchise relationship laws.

What Should I Include with My FDD Registration Application?

Your initial FDD registration application should include the following forms and documents:

• Filing fee of $500 payable to the State of Illinois

• Cover letter stating the name of the applicant

• Uniform Franchise Registration Application Page

• Supplemental Information Page

• Sales Agent Disclosure Form for each sales agent employment by or affiliated with the applicant

• Uniform Consent to Service of Process naming the Illinois Attorney General as agent to receive service, with corporate, individual, or partnership acknowledgment

• Certification Page

• Auditor's consent letter granting consent to use each audited report in the registration

• Uniform Franchise Offering circular in duplicate, current within 120 days and in compliance with UFOC Guidelines. Updated information pertaining to Items 20 or 21 may be submitted as an exhibit without changing the information already in these items.

Your Illinois registration application must comply with the Franchise Registration and Disclosure Guidelines published by NASAA and, effective January 1, 2020 must adopt and include the new NASAA Franchise State Cover Sheet.

What are the FDD Registration and Renewal Fees In Illinois?

The Initial FDD Registration Fee is $500 and the annual FDD Renewal Fee is $100. The fee for filing an FDD amendment is $100,

Where Is the FDD Registration Application Filed?

FDD registration applications must be filed with the Franchise Bureau at the following address: Franchise Bureau of the Illinois Attorney General, 500 South Second Street, Springfield, IL 62706.

The telephone number for the Franchise Bureau is (217) 782–4465.

How Long Does It Take to Obtain FDD Registration?

Once your registration application is fully submitted, a Franchise Examiner will be assigned to review your application and the disclosures contained in your FDD. Illinois examiners are quite thorough in their review of FDDs and FDD applications.

Once your application is received by the Franchise Bureau, a Franchise Examiner will be assigned to your application and you should expect an initial response within 21 days. The initial response that you will receive from your assigned Franchise Examiner will, most likely, advise you of FDD revisions required by the Examiner. Many of these revisions will relate to Illinois’s Franchise Disclosure Act and the requirements of Illinois’s franchise relationship laws. Upon satisfaction of the Examiner’s conditions, you will receive a written notice acknowledging that registration is granted. The Examiner’s notice will also advise you of the registration effective date and the registration renewal date.

Ultimately, the length of time it will take for your registration application to be approved will depend on the completeness of your FDD and how timely you respond to the Examiner’s comments. Typically, you should expect the process to take 8 weeks.

What Franchise Transactions Require Illinois FDD Registration?

Illinois FDD registration requirements and the Illinois Franchise Registration Disclosure Act apply where either: (a) the franchisee resides in Illinois (even if the franchised business will be located outside the state of Illinois), or (b) the offer of the franchise is made or accepted in Illinois and the franchised business is or will be located within the state.

Illinois Financial Assurance Registration Requirements

If during the FDD registration or renewal process the Illinois examiner determines that your franchise company possesses insufficient capital , the examiner will impose financial assurance requirements as a condition for your FDD registration. Common financial assurance requirements include your agreement to defer the initial franchise fees, escrowing the initial franchise fee, or the posting of a bond. Many times you will have the ability to choose between the three of these options however, in practice, deferral of the initial franchise fee is the most expedient and available option for start-up and emerging franchisors.

Illinois Franchise Relationship Laws

Illinois franchise law imposes franchisee relationship obligations on franchisors. These laws prohibit certain actions on the part of the franchisor such as prohibiting disparate treatment of franchisees, and limiting franchisor termination and non-renewal rights. Below is a summary of some of Illinois' franchise relationship obligations and prohibitions:

• Trade Associations - In Illinois, it is illegal for a franchisor to prevent or restrict a franchisee from joining a trade association;

• No Disparate Treatment - In Illinois, it is illegal for a franchisor to “unreasonably and materially discriminate between franchisees operating a franchised business located in [Illinois] in the charges offered or made for franchise fees, royalties, goods, services, equipment, rentals or other advertising services, if such discrimination will cause competitive harm to a franchisee who competes with a franchisee that received the benefit of the discrimination….” Exceptions to this rule are limited, but do include disparate treatment based on the franchises being granted at different times, and other limited exceptions.

• Termination Restrictions - In Illinois, it is illegal to terminate a franchise without good cause. Generally, under Illinois law, good cause exists when a franchisee has been given a 30-day notice of a violation of the franchise agreement and the franchisee has not cured its default.

• Non-renewal Restrictions - Generally, in Illinois, it is unlawful to deny a franchisee renewal of its franchise in circumstances where the franchisee will be prohibited from operating a competing business after expiration of the original franchise agreement. Also, it is illegal to deny a franchisee renewal without giving the franchisee 6 months’ prior notice of your election to deny renewal.