USA – ILLINOIS Law and Practice Contributed by: Carmen D. Caruso, Bill Whitner and Gage Meyers, Carmen D. Caruso Law Firm
3. Franchise Registration 3.1 Mandatory Registration
Effectiveness and Regulatory Review A franchise registration generally becomes effective on the 21st day after the required materials are filed, unless the Attorney General denies registration under Section 22 – for example, for non-compliance with the IFDA, a material misrepresentation or omission, or fraudulent or deceptive practices. See 815 ILCS 705/22. Registration does not constitute approval or endorse - ment of the franchise by the Attorney General, nor does it mean that the Attorney General has deter - mined the FDD to be accurate, complete or other - wise compliant with the IFDA. Registration merely authorises the franchisor to offer or sell the registered franchise in Illinois. Annual Renewal and Amendments Illinois registration is not a one-time filing; a franchisor must maintain it through periodic filings. Under Sec - tion 10, registration expires 120 days after the fran - chisor’s fiscal year-end, and the franchisor must file an updated disclosure document no later than one business day before expiry. See 815 ILCS 705/10. Section 11 also requires a franchisor to revise its disclosure statement within 30 days after each fiscal quarter to reflect material changes, and to file and deliver the amended statement to the Attorney Gen - eral and prospective franchisees similar to the initial registration. See 815 ILCS 705/11. The filing fee for an amended disclosure statement is USD100 when the amendment concerns a material change and USD25 for other amendments. See 815 ILCS 705/40 (c). 3.3 Consequences of a Failure to Register A franchisor may not offer or sell a franchise required to be registered unless it has been registered or an exemption applies. See 815 ILCS 705/10. Failure to register may result in administrative enforcement, including denial, suspension or termination of the registration and other relief under the Act, as well as civil penalties of up to USD50,000 per violation. See 815 ILCS 705/22, 24.
Illinois is one of a relatively small number of states that requires registration of franchise offerings under the IFDA. A franchisor generally must register its offering before offering or selling franchises in Illinois if: • the prospective franchisee is domiciled in Illinois; or • the offer is made or accepted in Illinois and the franchised business is or will be located in Illinois. The IFDA requires registration of the franchise offering through a notification and disclosure statement filing, not registration of each individual franchise agreement – the franchisor itself is not separately registered as an entity. 3.2 Franchise Registration Process When Registration Is Required Section 10 requires registration before offering or sell - ing a franchise in Illinois if the franchisee is domiciled in Illinois, or if the offer is made or accepted in Illinois and the business is or will be located there. Initial Registration Filing To register, a franchisor must file a notification and disclosure statement with the Illinois Attorney General, along with any required forms, including: • a Uniform Franchise Registration Application Page; • a Supplemental Information Page; • a Sales Agent Disclosure Form for each sales agent; • a Uniform Consent to Service of Process nam - ing the Illinois Attorney General as the agent for service of process; • a Certification Page; • an auditor’s consent letter for the use of audited financial reports; and • the franchisor’s current FDD. (See Ill Admin Code tit 14, Section 200.600.) Illinois also requires a USD500 fee for the initial regis - tration. See 815 ILCS 705/40 (b).
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