New York
Franchise Registration
New York
New York is a franchise registration state.
New York defines franchise as a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:
- A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor, and the franchisee is required to pay, directly or indirectly, a franchise fee, or
- A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services 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 franchisee is required to pay, directly or indirectly, a franchise fee. (NY CLS Gen Bus § 681).
New York Franchise Registration
The initial filing fee is $750 and must be accompanied by the following documents:
- Uniform Franchise Registration Application with Notarized Certification
- Uniform Franchise Consent to Service of Process
- Corporate Acknowledgement
- Franchisor’s Costs and Sources of Funds
- Franchise Seller Disclosure Form
- Consent of Accountant
- Advertising Verification Form
- Franchise Advertising Material (2 copies)
- A Clean Copy of the Franchise Disclosure Document (“FDD”)
New York Fee Deferrals
New York may require a fee deferral, which requires a deferment on the payment of initial franchise fees until the franchisor has completed its pre-opening obligations and is open for business. (NY CLS Gen Bus § 685).
New York does have a Surety bond and Escrow option. The Escrow option requires a bank with branches in New York to serve as an Escrow Agent. The Escrow option requires both New York and Franchisee Approval to release funds.
Because the New York fee deferral requires the franchisee to be open for business before the fee can be collected, the surety bond may be an attractive option for franchisors, especially where the business model requires is a buildout. This allows the franchisor to receive the initial franchise fee at the time the franchise agreement is executed without the extended delay caused by the buildout process.
However, a surety bond requires a franchisor to apply for the bond, go through underwriting, give a personal guarantee in some situations, and pay a premium of 1-3% of the bond amount normally.
The Fee Deferral requirement is generally an easier path with less state involvement, but it may not be suitable for everyone.
If the department of law finds that the applicant for registration has failed to demonstrate that adequate financial arrangements have been made to fulfill obligations to provide real estate, improvements, equipment, inventory, training, or other items included in the offering, the department may require the escrow or impoundment of franchise fees and other funds paid by the franchisee or subfranchisor until the obligations are fulfilled, or, at the option of the franchisor, the furnishing of a surety bond as provided by rule of the department of law if it finds that the requirement is necessary and appropriate to protect prospective franchisees or subfranchisors. (NY CLS Gen Bus § 685).
New York Franchise Amendments
New York requires an amendment filing and the franchisor shall promptly notify the department in writing, by an application to amend the registered offering prospectus, of any material change in the information. (NY CLS Gen Bus § 683).
A material change is defined broadly and includes:
- the termination, closing, or failure to renew, during a three-month period, of the lesser of 10, or 10 percent, of the franchises of a franchisor, regardless of location;
- a purchase by the franchisor in excess of five percent of its existing franchises during six consecutive months;
- a change in the franchise fees charged by the franchisor; and
- any significant adverse change in the business condition of the franchisor or in any of the following:
- (i) the obligations of the franchisee to purchase items from the franchisor or its designated sources;
- (ii) limitations or restrictions on the goods or services which the franchisee may offer to its customers;
- (iii) the obligations to be performed by the franchisor;
- (iv) the franchise contract or agreements, including amendments thereto;
- (v) the franchisor's accounting system resulting in a five percent or greater change in its net profit or loss in any six-month period; or
- (vi) the service, product or model line.
- audited financial statements of the preceding fiscal year.
A post-effective amendment filing is $150.
The renewal filing fee is $150 and must be accompanied by the following documents:
- Uniform Franchise Registration Application with Notarized Certification
- Franchisor’s Costs and Sources of Funds
- Franchise Seller Disclosure Form
- Consent of Accountant
- Advertising Verification Form
- Franchise Advertising Material (2 copies)
- A Clean and Marked Copy of the Franchise Disclosure Document
New York's Franchise Relationship Laws
New York does not have any laws specifically addressing franchise relationships.
More Information About New York's Franchise Laws
New York Franchise Registration Laws
New York Business Opportunity Laws
New York does not have laws pertaining directly to business opportunities. However, the definitions of “franchise” and “franchise fee” in New York statutes renders most business opportunities subject to the franchise registration and disclosure requirements. (NY Gen Bus L §681 (3))
If you would like to learn more about our franchise services and franchise compliance in New York, contact us or call (757) 263-4596 to schedule a consultation. You can also visit our interactive map to explore franchise laws in other states.
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