FRANCHISING IN ARKANSAS
Registration or Filing Required?
No
Business Opportunity Laws?
No
Arkansas is not a franchise registration state. Arkansas does not require franchisors to register their FDD with a state regulator before offering or selling a franchise in the state. Franchisors must disclose a legally compliant FDD in accordance with the FTC Franchise Rule prior to offering or selling a franchise in Arkansas.
Arkansas regulates franchise relationships through the Arkansas Franchise Practices Act. The Arkansas Franchise Practices Act is comprised of franchise relationship laws that govern aspects of the franchisor-franchisee relationship including issues involving termination, cancellation and non-renewal of franchise relationships. Arkansas enacted franchise relationship laws that govern the relationship between franchisors and franchisees. These franchise relationship laws are known as the Arkansas Franchise Practices Act. Under this 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.
This Act creates exemption for traditional retail type businesses that lack a degree of control over the merchandising activities of the store and focuses 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 Rights. 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 canceling, terminating, or not renewing the franchise agreement.
- Sales/Transfers. Franchisees are required to provide franchisors with written notice of the franchisee’s intention to transfer or assign the franchise agreement. This notice 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. These provisions are typically covered in and may amend the franchise agreement.
The Act creates private rights of action and remedies for material omissions, false and misleading information given during the franchise sales process. Franchisor liability may also exist in Arkansas if the franchisor terminates a franchise without good cause and such liability may extend to a franchisor’s obligation to repurchase a franchised outlet.