Arizona Franchise Registration
According to a recent study, Arizona was one of the best places in the United States to start a company with high chances of success. After posting the fourth-best Gross Domestic Product rate in 2018, it has become among the fastest-growing states. Businesses are relocating to Arizona mainly because of the low tax rates, limited regulations, business credits, and low cost of living makes the state a suitable place for business growth and limitless opportunities for economic growth. In addition, the labor market is growing, which is an added advantage for businesses looking to establish in Arizona, and the manageable taxes make it more attractive for investors and entrepreneurs.
The state of Arizona is among the many states in the country with a non-registration policy for franchisors. This means that you are not required to register your Franchise Disclosure Document (FDD), but you have to ensure you have a valid FDD that is issued correctly in compliance with Federal Franchise Law. Compliance with these laws automatically exempts you from Arizona’s business opportunity requirements.
As a business opportunity state, Arizona does not allow you to sell or offer a franchise unless you file a verified registration with the state and pays the registration fee and annual renewal fee. However, like other state franchise laws, Arizona franchise law doesn’t impact how franchisors operate. According to the law, the state’s franchise law excludes the sale of franchises as defined by the Federal Trade Commission Amended Franchise Rule from the definition of a franchise. Therefore, a franchisor is exempted from complying with the state’s franchise laws. As long as a franchisor complies with the FTC Rule, they are not mandated to make additional filings if they intend to provide a prospective franchisee with a Franchise Disclosure Document in Arizona.
The state enacted a new business opportunity rule which took effect on August 2, 2012, that required anyone with the intention of selling or leasing a “business opportunity” that costs at least $500 must now register with the state and make written disclosures when leasing or selling of the business. Failure to register before such activities you risk facing penalties and other severe consequences. For instance, a seller who does not follow the correct registration procedure automatically limits the buyer’s opportunity or right to rescind the sale at any given time.
In comparison to the FTC Business Opportunity Rule, Arizona’s Rule appears to be broader, making compliance with the FTC Business Opportunity Rule uncertain when it comes to state rules compliance. Arizona rules are more comprehensive in defining what a “business opportunity” is and impose disclosure requirements and registration that differ from the FTC Business Opportunity Rule. Businesses should avoid using FTC’s Business Opportunity Rule when assessing the need for compliance with the state rules.
For more information on how to register your franchise in Arizona, visit the Franchise Marketing Systems site: https://www.fmsfranchise.com/learn/resources/state-guidelines/