Tennessee Franchise Registration

Tennessee Franchise Registration

The state of Tennessee is not only famous for high-powered entertainment and panoramic view, but it offers an unmatched business climate that allows businesses to flourish. The state’s growing economy and low cost of living have attracted a dedicated and skilled workforce across various industries from all over the country. Tennessee has a strong economy, especially in education, entertainment, tourism, agriculture, and automotive industries. With one of the best tax rates like lenient property taxes and zero income tax, and estate tax is why franchising is an excellent idea in Tennessee.

Tennessee is a non-registration state, but the difference from other states in that category is that it has enacted franchise laws that govern the franchisor-franchisee relationship. Therefore, like other non-registration states, franchisors are not required to file or register their Franchise Disclosure Document with the state. Still, they must comply with Tennessee’s franchise relationship laws and Federal Franchise Rule. 

The federal franchise rule stipulates that franchisors must issue and disclose their Franchise Disclosure Document 14 days before committing to any agreement or accepting any form of payment from a prospective franchisee. The Tennessee franchise law defines a franchise as all written and oral agreements that allow another party the license and right to the primary trademark and to provide and distribute products and services within a particular territory. 

Businesses that fall under this category must adhere to Tennessee’s and federal franchise laws. Franchisors are prohibited from acting on non-renewal, modification of franchise rights, and termination within the state. In addition, according to the code, franchisors are expected to undertake their franchise relationship in good faith by providing sufficient opportunities, among other rights.

Tennessee’s franchise relationship rights provide franchisors with supplement rights that determine the conditions for franchise agreement termination and the rights allowing third-party and family transfer without the franchisor’s approval. These relationship laws impose restrictions on a franchisor’s right to; terminate a franchise agreement, deny renewal of a franchise agreement, limit family transfer, and disapprove non-family transfer. In addition, franchisors who violate these relationship laws result in legal measures by the franchisee for equitable relief for damages incurred, including fees spent on legal counsel.

The state’s franchise relationship laws have played a vital role in supporting the franchise business model by providing a joint employer liability shield to franchisors as stipulated in Tennessee Code, Title 50, Chapter 1, Section 208. This is an excellent counter to joint employer liability determinations since it disclaims any employment relationship between franchisors with either franchisees or their employees. 

It is advisable to consult a professional franchise attorney before franchising in Tennessee to ensure that you adhere to State Franchise Relationship Laws and the Federal Trade Commission Amended Franchise Rule. A layer also helps you create an FDD that covers all the bases before presenting it to a potential franchisee.

For more information on how to register your franchise in Tennessee, visit the Franchise Marketing Systems site:  https://www.fmsfranchise.com/learn/resources/state-guidelines/

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