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International franchising

Question: Are we able to promote/advertise the availability of our franchise as a Master Franchise Opportunity in the US before we meet the US government disclosure requirements?

Answer by Mark Siebert, ifranchise

Disclaimer first. I am not an attorney and your client should speak with one before taking any such advice from a non-attorney.

Complicated question. At the federal level, nothing would prevent them from advertising. Technically, they would need to provide FDD on reasonable request. There is no registration requirement at the federal level.

On a state-by-state basis, the laws vary. I do not believe there is any restrictions on advertising for a US Master. Some states, like New York, have laws that would prevent advertising prior to registration if the media had 50% or more of its circulation in NY. Obviously, that would not apply. So I do not see a reason they could not advertise.

That said, some states will have requirements that before you can talk to a resident of that state you must be registered. For example, Maryland still has the "first personal meeting" rule and other states will not allow a conversation until you are registered in the state. On a state-by-state basis, there are single sale exemptions, "Big Boy" exemptions, large investment exemptions, etc. So it gets complicated. Without knowing more, it is hard to say.

So short version, I do not think your client will have a problem with advertising, but if they get leads from those ads, they may not be able to respond depending on where the franchise prospect is located or where the prospect is interested in franchising.

Mark Siebert
www.ifranchisegroup.com
msiebert@ifranchisegroup.com

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