Practical Legal Tips

Violate State Franchise Laws At Your Own Peril

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Lately I have advised several laid off executives from corporate America who are enjoying a rebirth as successful franchisors. What comes as a surprise to prospective franchisors is that they can be held personally liable for violating state franchise laws. Georgia does not have a state franchise law, however, California and Illinois require state registration prior to selling a franchise. If a franchisor fails to follow state franchise laws, in many cases, the corporate veil does not protect them. They can be held personally liable for violation of such laws. It is critical, therefore, that you understand which states have franchise laws that require registration in addition to complying with the Federal Trade Commission's franchise rule.

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