Indiana Franchise Compliance Alert: Changes Ahead

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Indiana issued a compliance alert covering four updates to the Indiana franchise laws to take effect on July 1, 2020. The changes (i) add a duty to update FDD within 30 days of a material change (ii) grant the ability to select specific annual registration termination dates, (iii) clarify the exemption coverage; and (iv) clarify that franchise fees are non-refundable.

Duty to Update Franchise Disclosure Document within 30 days of a material change.

Beginning on July 1, 2020, franchises registered with the Securities Division of the Indiana Secretary of State must file an amended disclosure statement within 30 days after the franchise has a “material change” as defined by I.C. § 23-2-2.5-13.1(b). Material changes include, but are not limited to:

  • termination, closing, failure to renew the franchise or purchase by the franchisor of either: ten percent (10%) of all franchises regardless of location or ten percent (10%) of franchises located in Indiana;
  • any reorganization or change of control, corporate name or state of incorporation;
  • any change in the franchise fees charged by the franchisor; and
  • significant changes in the obligations to be performed by the franchisor or a franchisee or the franchise contract or agreement.

The rule also provides for a “catch-all” granting the commissioner the ability to determine whether a change is material by rule adopted or order issued.

Grant the ability to select specific annual registration termination dates

A franchise may now request that its registration expire on a date sooner than one year from registration to allow the franchise to coordinate registration renewals across multiple states. I.C. § 23-2-2.5-18.

Clarification of the exemption coverage

The updated rule clarifies that the exemption to the registration rules for franchises that sell no more than one franchise within any 24 month period considers only franchises sold within Indiana. I.C. § 23-2-2.5-3.

Clarification that franchise fees are non-refundable

The updated rule clarifies that the filing fee registration by notification of the sale of franchises and for a registration renewal is non-refundable. I.C. § 23-2-2.5-43.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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