Alabama Franchise Registration

There is a reason why Alabama has one of the best business climates in the United States. The state has focused on strengthening the fundamentals of economic development, attracting many businesses from all over the country. Companies setting up in the state are offered a wide range of business credits and tax breaks. With the third-lowest property tax in the country, most businesses find it easy to in Alabama. In addition, the state provides businesses with industry-ready workers ready to help your business succeed. Alabama has diverse skills and various industries such as aerospace and aviation, bioscience, agriculture, and automotive.

The state of Alabama is a franchise non-registration state, which means franchisors are not required to register their Franchise Disclosure Document with the state. However, since the state has not enacted any franchise laws, franchisors must comply with the Federal Trade Commission Amended Franchise Rule (FTC Rule). With federal franchise laws continuously in flux, consulting a franchise attorney helps when franchising in any state. 

All franchisors are required to have all the relevant Documents before franchising in Alabama. These documents include a Franchise Disclosure Document, financial statement, specific appendices, and an operations manual. The FTC Rule governs the franchisor-franchisee relationship and stipulates that the franchisor must issue prospective franchisees a copy of a Franchise Disclosure Document 14 days before the sale date. The Federal franchise laws recognize franchise relationships formed after an agreement involving a license of a trademark, payment of initial fee, and offering a degree of control over the franchise.

Alabama has received several proposals demanding the regulation of franchise sales, but still, there are no specific franchise laws. The state also lacks business opportunity and relationship laws that stipulate registration requirements or govern the franchisor-franchisee relationship. This means that franchisors need to familiarize themselves with the Federal Trade Commission Amended Rule before offering or selling a franchise in Alabama.

The FTC Rule provides guidelines for franchising in all the states and helps to protect prospective franchisees from risks associated with committing to a franchise agreement. Franchisors must issue franchisees with a copy of an updated Franchise Disclosure Document 14 days before the actual date of the sale. This provides the buyer with sufficient information before committing to any agreement or making payments.

The federal franchise law requires the franchisor to present a franchisee with a well-drafted Franchise Disclosure Document containing critical details about the business. Some of the information contained in the FDD include cost, franchise location, previous and current franchisee information, and other relevant information. The aim is to provide the buyer with a clear picture of the business before choosing to invest. 

It is advisable to consult an expert franchise attorney to help you draft an FDD that covers all the required 23 items and any other information deemed pertinent. This goes a long way in ensuring you avoid any fines and penalties due to the infringement.

For more information on how to register your franchise in Alabama, visit the Franchise Marketing Systems site:  www.FMSFranchise.com/about-franchising/guidelines/stateregulations