General Information

In Indiana, a franchise is “a contract by which a franchisee is granted the right to engage in the business of dispensing goods or services, under a marketing plan or system prescribed in substantial part by a franchisor; the operation of a franchisee’s business pursuant to such a plan is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and the person granted the right to engage in this business is required to pay a franchise fee.” In order to offer or sell a franchise in Indiana, a franchisor must either register the franchise offering with the Indiana Secretary of State, Securities Division (“Division”) or otherwise be exempt from registration under Ind. Code § 23-2-2.5-3, Ind. Code § 23-2-2.5-4, or Ind. Code § 23-2-2.5-5.

Franchise

For initial franchise filings, a franchise becomes effective upon receipt by the Division if no stop order is in effect. Franchise registrations are effective for a period of one (1) year. The North American Securities Administrators Association (“NASAA”) has drafted guidelines to assist and provide a framework for franchisors to draft initial and renewal franchise registration documents. Franchisors should utilize and review the Franchise Guidelines when drafting initial and renewal franchise registration documents.

A franchise registration may be renewed by submitting to the Division the renewal filing requirements listed below, not later than the date the registration is due to expire. Unless an early renewal period is explicitly requested through written documentation, a renewal registration becomes effective upon the expiration of the prior offering. If a franchise fails to renew a registration prior to its expiration, the franchise will be required to submit an initial filing and pay the initial filing fee.

As a notice filing state, Indiana does not review franchises for the merits of the offering, rather it ensures that potential franchisees have current information regarding franchises by requiring franchises to file annual disclosure documents with the Division. As franchises are not reviewed for the merits of the offering, a registration that has been submitted and is effective with the Division does not “constitute a finding by the commissioner that any document filed . . . is true, complete, and not misleading.”

In addition to Indiana’s laws regarding franchises, the Federal Trade Commission (“FTC”) regulates franchises at a federal level. Franchises must comply with the federal laws regarding franchise offerings. To ensure compliance with both state and federal laws, contact private counsel to advise on franchise offerings.

Franchise Exemptions

A franchise is not required to register with the Division if the offer or sale of the franchise is exempt from registration. The de minimis exemption does not require registration “if the franchisor sells no more than one (1) franchise in any twenty-four (24) month period[.]” The large net worth exemption allows franchisors of a certain size to offer and sell franchises in Indiana without registering the franchise. Exemptions are self-executing, however, a franchisor may request that the Division issue a determination letter which would state, based on information submitted by the franchisor, whether the franchisor is entitled to the de minimis or large net worth exemption. Franchisors that wish to receive a determination letter would submit, via the Indiana Securities Portal, a verified statement of all material facts that will assist the Division in making a determination of exemption, together with a fifty dollar ($50) filing fee.

In addition to the de minimis and large net worth exemptions, the offer and sale by a franchisee may be exempt “if the offer or sale is not effected by or through a franchisor.” Additionally, sales may be exempted by rule or order if it is “not being comprehended within the purposes of this law and the registration of which [the commissioner] finds is not necessary or appropriate in the public interest or for the protection of investors.” For all exemptions the burden of proof for claiming an exemption is ultimately on the party claiming the exemption.

Requirements
Initial Registration
  • The initial franchise registration is completed on the Indiana Securities Portal.
  • The initial filing fee for the franchise registration is five hundred dollars ($500).
  • Pursuant to Ind. Code § 23-2-2.5-24, the Indiana Secretary of State must be listed as the Franchisor’s Agent for Service of Process.
  • The franchise must submit the following documents, available with instructions in the Franchise Guidelines, through the Indiana Securities Portal:
    • Franchise Disclosure Document (FDD);
    • Franchise Seller Disclosure Form for every individual who will solicit, offer or sell franchises in Indiana;
    • Uniform Franchise Consent to Service of Process; and
    • Any additional or supplemental materials necessary for the review of the offering.
Renewal Registration
  • The renewal franchise registration is completed on the Indiana Securities Portal.
  • The renewal filing fee for the franchise registration is two hundred and fifty dollars ($250).
  • Renewals must be submitted prior to the expiration of the previous registration. Any renewal that is received by the Division after the previous registration’s expiration date will be subject to the initial filing requirements, which includes the five hundred dollar ($500) initial filing fee.
  • Pursuant to Ind. Code § 23-2-2.5-24, the Indiana Secretary of State must be listed as the Franchisor’s Agent for Service of Process.
  • The franchise must submit the following documents, available with instructions in the Franchise Guidelines, through the Indiana Securities Portal:
    • Franchise Disclosure Document (FDD);
    • Franchise Seller Disclosure Form for every individual who will solicit, offer or sell franchises in Indiana;
    • Uniform Franchise Consent to Service of Process; and
    • Any additional or supplemental materials necessary for the review of the offering.
Ongoing Filing Requirements
  • Franchises are not required to file with the Division any supplemental information after the filing is effective, including any amendments to the disclosure statement.
  • If the franchise updates its FDD while a registration is effective, it may submit the FDD as an amendment to the current registration, or request an early renewal by explicitly stating that it is requesting an early renewal and meets all renewal filing requirements.
Franchise Exemptions
  • Franchise Exemption requests must be submitted through the Indiana Securities Portal.
  • The Franchise Exemption filing fee is fifty dollars ($50).
  • The franchise must submit a verified statement and any accompanying documents that show evidence that the franchise meets an exemption under Ind. Code § 23-2-2.5-3.
  • While a determination of exemption may be issued by the Division, it is reliant upon statements by the franchise and the burden of proof in any civil or criminal action is on the franchise.
Relevant Law

Indiana Code [23-2-2.5]
Franchise Waiver [06-0024 AO – March 10, 2006]
Franchise Registrations By Notification [01-0109 AO – June 4, 2001]
Franchises Offered on the Internet, But Not Sold in Indiana [97-0378 AO – December 24, 1997]
Franchise Isolated Sale Exemption Claimed Pursuant to IC 23-2-2.5-3 [96-0133 AO – November 19, 1996]
Statement of Policy Regarding Electronic Delivery of Franchise Disclosure Documents [October 25, 2005]
Compliance Alert: Indiana Securities Division Response to the COVID-19 Outbreak [March 24, 2020]

Helpful Resources

Federal Trade Commission (“FTC”)
Franchise Resources – NASAA
Franchise Rule [Federal Trade Commission]
Franchise Rule Compliance Guide – Federal Trade Commission
North American Securities Administrators Association (“NASAA”)
NASAA 2008 Franchise Registration and Disclosure Guidelines (“Franchise Guidelines”)

Division Personnel

Connor Skelly
Registrations Attorney
cskelly@sos.in.gov
317-234-2026