Virginia Franchise Registration
The state of Virginia, also known as Commonwealth Virginia, is an American state located between the Appalachian Mountains and the Atlantic Coast with a population of 8.65 million. The state has a diverse economy in terms of income generation, including federal and local government, farming, tourism, technology, and military. With an average earning of $63,280 per job, and a gross domestic product of $476.4 billion in 2018, it ranks the 13th largest state. In addition, leading publications have named the state best for business, with most companies setting up shop.
Virginia is among the franchise registration states, meaning that franchisors must register and fill a Franchise Disclosure Document with the Virginia State Corporation Commission before offering or selling a franchise within the state. The registration fee for the FDD in Virginia is $500 if it’s the first time you are registering a franchise and a renewal fee of $250.
The state’s franchise law, also known as the Retail Franchise Act, has extensive regulations and rules which govern the franchisor-franchisee relationship. The corporation commission’s Division of Security and Retail Franchising ensures that franchisors abide by the state’s franchise registration requirements and laws. The division operations are stipulated under Virginia’s retail franchising act, whereby all franchisors must register for their FDD, renew it annually, and file any amendments at the Division of Securities and Retail Franchising. Like most states in the country, Virginia requires audited financial statements when registering for the FDD and doesn’t permit start-up franchisors to register using an unaudited opening balance sheet.
Start-up franchisors who are new to franchising must have an audited opening balance sheet during the initial FDD registration since the state doesn’t permit phase-in of audited financial statements. However, after the initial registration phase is complete, annual renewal includes financial statements that have been audited for three years, which comprises of “statement of stockholders’ equity,” “statement of operations (profit and loss statements),” and “statement of cash flows.”
However, suppose your recent audited financial statements included in your FDD is more than 120 days old from the date you file your registration. In that case, the FDD is supplemented with financial statements prepared with general accounting principles. This involves an unaudited interim balance sheet within 120 days of the application date and unaudited information of income or operations from the recent audited financial statements to the date of the interim balance sheet.
The state examiner usually reviews the financial statements for the franchise company during the FDD registration to determine if it is solvent. A franchise is denied registration if the examiner determines the company is at risk of becoming insolvent under Section 13.1-562 of the Retail Franchise Act. If the registration is allowed, it is conditioned by the imposition of a Financial assurance requirement. This comprises the initial franchise fee escrow with an approved Virginia bank or an agreement to defer receipt of the initial franchise fee for each franchise sold in the state.
For more information on how to register your franchise in Virginia, visit the Franchise Marketing Systems site: www.FMSFranchise.com/about-franchising/guidelines/stateregulations