FRANCHISING IN MINNESOTA
Registration or Filing Required?
Yes (Registration)
Business Opportunity Laws?
Yes
Minnesota is a franchise registration state. You must register your FDD with the Securities Division of the Minnesota Department of Commerce prior to offering or selling franchises in the state. Minnesota charges a $400 fee for the initial registration application and a $200 fee for renewal applications (unless there are material changes from the prior year, Minnesota will also require an amendment fee for a total of $300) As of January 1, 2023, all registrations in Minnesota are effective for 12 months from the date the registration becomes effective in Minnesota. Registration applications can be submitted online through the Minnesota Department of Commerce’s website but you must send all filing fee to Minnesota separately.
The Minnesota Franchise Act has a very in-depth definition of what constitutes a franchise. In Minnesota, a business is considered a franchise when:
- There is a contract in which the buyer: i) is granted the right to sell or distribute goods or services associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol; ii) has a common interest with the seller in marketing the goods or services; and iii) pays a fee.
- There is a contract in which the buyer is granted to right to market motor vehicle fuel at retail under the seller’s name, trademark or other commercial symbol.
- There is a sale or lease of goods or services (other than demonstration equipment for less than $500) in which the purpose is to enable the buyer to start a business, where the seller: i) represents that it will provide location assistance to the buyer; ii) represents that it will purchase any or all products made by the buyer with the goods or services supplied by the seller; or iii) guarantees that the buyer will derive income exceeding the purchase price.
- There is a contract in which a manufacturer, selling security systems through distributors in the state, requires regular payments from the distributor as royalties or residuals for products purchased and paid for by the distributor.
The process for registration typically takes several weeks, if not months. You must also file your renewal for franchise registration and if you do not, your registration will be cancelled, and you will have to file a new initial registration application. Your renewal application must contain everything required for your initial application, except that you must submit a blacklined FDD showing the changes made from the previous year.
If you make a material change to your FDD, you must amend your franchise registration in Minnesota within 30 days of making said change. The amendment application requires certain documents and the blacklined portions of the FDD where the material changes occurred. You will be required to pay the $100 amendment filing fee. The Department lists a few examples of what would constitute a material change, including:
- Terminating or failing to renew 10% of franchisees, or 10% of franchisees in Minnesota, in a 3-month period.
- Changes in control, corporate name, or state of incorporation of the franchisor.
- The franchisor purchasing 10% of its franchises in a 3-month span.
- Adding a product that requires franchisees to invest more than 20% of their current average investment.
- Removing a product that accounts for more than 20% of franchisee’s average gross sales.