Exemption based franchising in the USA

Many UK brands are initially put off considering the US when expanding their operations because of the level of bureaucracy and cost of complying with US franchising laws.

Various US franchising laws need to be considered to determine whether they apply in the context of exploratory talks with prospective US investors or multi-unit franchisees.

But every transaction will be subject to such extensive requirements due to the possibility that there may be one or more exemptions that can apply. This can enable UK brands to investigate the potential or get an initial toe hold in the US market with less bureaucracy and at a lower initial cost.

Why Freeths

Freeths LLP is a leading UK law firm, and we have franchise experts in a number of our offices. We have extensive experience in structuring, negotiating and documenting franchise transactions in the UK and internationally, including multinational master franchise, area and regional developer and area representative arrangements, joint ventures and other distribution and brand licensing relationships.

We can provide high level advice to UK brands considering seeking potential investors or market opportunities in the US about the availability of exemption-based franchising.

US laws, and in particular individual state laws, need to be considered on a case-by-case basis to determine whether it may be possible to undertake exemption-based franchising. To do that, Freeths has teamed up with a highly regarded boutique franchise law firm in the US to give UK brands specific advice on whether an exemption-based franchise approach may work for them, without having to develop a full-scale franchise disclosure document.

 

Franchise Registration States

“The team is very able at managing simple issues with care and attention, and very complex and fluid cases in a sophisticated and commercial manner.”

– Chambers & Partners, 2023

Franchising in the USA

The popularity of franchising and vast market opportunity in the US makes it a very attractive prospect for a UK brand looking to expand its operations. There are various laws applicable to franchising in the US which need to be considered to determine whether they apply in the context of exploratory talks with prospective US investors or multi-unit franchisees.

Many UK brands are initially put off considering the US because of the level of bureaucracy and cost of complying with US franchising laws.

However, not every transaction will be subject to all these requirements due to the possibility that there may be one or more exemptions that can apply. This can enable UK brands to investigate the potential or get an initial toe hold in the US market without the level of bureaucracy and cost of complying with the various US franchise laws.

Introducing exemptions

For a UK brand considering entry to the United States for the purpose of “testing the waters,” the possibility of an exemption may make the market-testing exercise and initial entry into the US considerably more efficient, more cost effective and less burdensome.

Exemptions are highly fact dependent and vary from state to state.

A careful factual review is therefore necessary before concluding that a UK brand can initially offer to sell a franchise in the US without having to comply with applicable regulatory requirements.

Exemptions