Washington Franchise Law and FDD Registration

Washington Franchise Law and FDD Registration

Washington State is a franchise registration state. Before offering or selling a franchise in Washington, you must register your FDD with the Securities Division of the Washington State Department of Financial Institutions. The initial filing fee is $600 and the renewal fee is $100. FDD registration lasts for one year and requires annual renewal.

To learn more about registering your FDD in Washington and how we can help get you registered, give us a call at (800) 976-4904 or contact us.

Washington State Franchise FAQs

Who Regulates Franchises in Washington?

The Securities Division of the Washington State Department of Financial Institutions regulates and oversees the enforcement of Washington’s Franchise Investment Protection Act and the registration of FDDs. Washington’s franchise laws are comprised of the Washington Franchise Investment Protection Act.

What Should I Include with My Washington Franchise Application?

When filing your Washington registration application, you must include the following:

• Filing fee of $600 for initial registration applications and $100 for renewals;

• FDD including Washington State addendum;

• Franchise registration application;

• Salesman disclosure form; and

• Financial statements with accountant’s consent.

Where Do I File My Washington FDD Registration Application?

Applications for initial FDD registration, annual renewals, and amendments are filed at:

Washington State Department of Financial Institutions
Securities Division
P.O. Box 9033
Olympia, WA 98507

Their telephone number is (360) 902-8760.

What Are the Fees for Franchise Applications in Washington?

The filing fee for initial FDD registration in Washington is $600, and the fee for annual FDD renewals and updated filings is $100.

Does Washington State Impose Escrow or Impound Conditions?

The Department of Financial Institutions will evaluate a franchisor’s balance sheet and if, according to the Department, the franchisor possesses insufficient shareholder equity, the Department may impose an impound condition where a franchisor’s registration is contingent upon the franchisor agreeing to escrow its receipt of upfront franchise fees until the franchisee is ready to open the franchised business. The following link is to Washington State’s sample impound agreement. Alternatively, a franchisor may agree to defer receipt of its initial franchise fee.

When Do I Have to Renew My Washington FDD Registration?

You must renew your FDD registration no later than 15 business days prior to the expiration of your then-current registration. The franchise registration renewal fee is currently $100.

When Do I Have to Amend My Washington FDD Registration?

In Washington State and every other franchise registration state, you must amend and update your FDD registration whenever a "material change" in the disclosures of your FDD occurs. Under Washington’s Franchise Investment Protection Act (RCW 19.100.070), franchisors must file a franchise registration amendment whenever the franchisor experiences:

• A material change in the condition of the franchisor.

• A material change in the condition of the subfranchisor.

• A material change in the information contained in the FDD.

An amendment for a material change must be filed as soon as reasonably possible and before any additional franchise sales. The franchise registration amendment application must be filed along with a fee in the amount of $100.

What Qualifies as a Franchise in Washington State?

Under the Washington Franchise Investment Act, a franchise agreement is defined as an express, implied, oral, or written agreement, by which:

• A person is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan prescribed or suggested in substantial part by the grantor or its affiliate;

• The operation of the business is substantially associated with a trademark, service mark, trade name, advertising, or other commercial symbol designating, owned by, or licensed by the grantor or its affiliate; and

• The person pays, agrees to pay, or is required to pay, directly or indirectly, a franchise fee.

Franchise Relationship Laws in Washington State

Washington’s Franchise Investment Protection Act (FIPA) imposes obligations on franchisors that govern the franchisor-franchisee relationship in Washington State. The following actions are prohibited under Washington’s franchise relationship laws:

• Franchisee Associations - Restricting the formation of and participation in franchisee associations.

• Disparate Treatment of Franchisees - Discriminating between franchisees in the charges offered or made for royalties, goods, services, equipment, rentals, advertising services, or in any other business dealing, unless and to the extent that the franchisor satisfies the burden of proving that any classification of or discrimination between franchisees is:
  (a) Reasonable;
  (b) Based on franchises granted at materially different times; and
  (c) Not arbitrary.

• Unfair or Unreasonable Pricing - Selling, renting, or offering to sell to a franchisee any product or service for more than a fair and reasonable price;

• Undisclosed Rebates - Obtaining money, goods, services, anything of value, or any other benefit from any other person with whom the franchisee does business on account of such business unless such benefit is disclosed to the franchisee.

• Territory Violations - If the franchise provides that the franchisee has an exclusive territory, which shall be specified in the franchise agreement, for the franchisor or subfranchisor to compete with the franchisee in an exclusive territory or to grant competitive franchises in the exclusive territory previously granted to another franchisee;

• Violation Waivers - Requiring a franchisee to assent to a release, assignment, novation, or waiver that would relieve any person from liability imposed by this chapter, except as otherwise permitted by this section;

• Unreasonable Standards - Imposing on a franchisee by contract, ruling, or regulating, whether written or oral, any standard of conduct unless the person so doing can sustain the burden of proving such to be reasonable and necessary;

• Nonrenewal Requirements - Refusing to renew a franchise without fairly compensating the franchisee for the fair market value, at the time of expiration of the franchise, of the franchisee's inventory, supplies, equipment, furnishings purchased from the franchisor, and goodwill; exclusive of personalized materials which have no value to the franchisor, and inventory, supplies, equipment and furnishings not reasonably required in the conduct of the franchise business. However, compensation need not be made to a franchisee for goodwill if (a) the franchisee has been given one year's notice of nonrenewal and (b) the franchisor agrees in writing not to enforce any covenant that restrains the franchisee from competing with the franchisor; and

• Termination Without Good Cause - Terminating a franchise prior to the expiration of its term except for good cause. Good cause shall include, without limitation, the failure of the franchisee to comply with lawful material provisions of the franchise or other agreement between the franchisor and the franchisee and to cure such default after being given written notice thereof and a reasonable opportunity, which in no event need be more than thirty days, to cure such default. If such default cannot reasonably be cured within thirty days, the failure of the franchisee to initiate within thirty days substantial and continuing action to cure such default: PROVIDED that after three willful and material breaches of the same term of the franchise agreement occurring within a twelve-month period, for which the franchisee has been given notice and an opportunity to cure as provided in this subsection, the franchisor may terminate the agreement upon any subsequent willful and material breach of the same term within the twelve-month period without providing notice or opportunity to cure: PROVIDED FURTHER that a franchisor may terminate a franchise without giving prior notice or opportunity to cure a default if the franchisee: (i) is adjudicated a bankrupt or insolvent; (ii) makes an assignment for the benefit of creditors or similar disposition of the assets of the franchise business; (iii) voluntarily abandons the franchise business; or (iv) is convicted of or pleads guilty or no contest to a charge of violating any law relating to the franchise business. Upon termination for good cause, the franchisor shall purchase from the franchisee at a fair market value at the time of termination the franchisee's inventory and supplies, exclusive of (i) personalized materials which have no value to the franchisor; (ii) inventory and supplies not reasonably required in the conduct of the franchise business; and (iii), if the franchisee is to retain control of the premises of the franchise business, any inventory and supplies not purchased from the franchisor or on his express requirement: PROVIDED that a franchisor may offset against amounts owed to a franchisee under this subsection any amounts owed by such franchisee to the franchisor.

Broker Registration in Washington State

Brokers are required to register with the Washington State Department of Financial Institutions prior to offering or selling a franchise in Washington State. For a franchise broker to register in the State of Washington, the following steps must be satisfied:

• Submit a completed Washington State broker registration application;

• Disclose the franchise broker’s proposed method for doing business;

• Disclose a list of the broker’s qualifications and business history;

• Disclose any injunction or administration order(s) or conviction(s) of the broker; and

• Disclose the broker’s financial history.