Illinois
Franchise Registration

Illinois

Illinois is a franchise registration and business opportunity law state.

Illinois Franchise Laws

Illinois defines a franchise as an oral or written contract or agreement 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 or suggested in substantial part by a franchisor; and
The operation of the franchisee’s business pursuant to such plan or system is 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 person granted the right to engage in such business is required to pay to the franchisor or an affiliate of the franchisor, directly or indirectly, a franchise fee of $500 or more;

Illinois Franchise Registration Filing

Illinois is a franchise registration state that requires filing the Franchise Disclosure Document (“FDD”) with the state.

In the state, it’s common for the authorities to review and issue comment letters suggesting edits to the Franchise Disclosure Document (FDD) as requested by the Franchise Regulator.

The initial filing fee is $500 and must be accompanied by the following documents:

Illinois Fee Deferrals

Illinois 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. (815 ILCS 705/15).

Illinois does have a Surety bond option. Since Illinois requires the franchisee to be open for business, the surety bond is a great option, especially where there is a buildout so the franchisor can receive the initial franchise fee without an extended delay.

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.

Illinois Franchise Amendments

Illinois requires an amendment filing within 30 days after the close of each quarter of its fiscal year of any material change, (815 ILCS 705/11).

A material change is defined broadly and includes:

a) any increase or decrease in the initial or continuing fees charged by the seller;

b) a change in more than 15 percent in the number of requests for refund or other mode of termination or cancellation of business opportunities sold which were received by the seller in the most recent quarter since the effective date of the current disclosure document;

c) a change in the seller’s management;

d) a change in the seller’s or purchaser’s obligations under the contract or agreement of sale or related agreements;

e) a decrease in the seller’s income of more than 25% of net worth of more than 25%; or

f) additional litigation or a significant change in the status of litigation,

A post-effective filing is $100.

Illinois Franchise Renewals

The renewal filing fee is $100 and must be accompanied by the following documents:

Illinois Franchise Relationship and Termination Laws

Illinois makes it unlawful for a franchisor to terminate a franchisee without “good cause.” (815 ILCS 705/19).

More Information About Illinois Franchise Laws

Illinois Franchise Disclosure Act of 1987

Learn More

Illinois Franchise Consumer Protection

Learn More

Illinois Business Opportunity Laws

Illinois also has Business Opportunity Laws, which define a “business opportunity” as a contract or agreement, between a seller and purchaser, wherein it is agreed that the seller shall provide the purchaser any product, equipment, supplies or services and upon payment of an initial required consideration exceeding $500 for the purpose of enabling the purchaser to start a business, and in which the seller:

Represents that the seller will provide locations or assist the purchaser in finding locations for the use or operation of vending machines, racks, display cases or other similar devices, or currency-operated amusement machines or devices, on premises neither owned nor leased by the purchaser or seller; or
Represents that it will provide or assist the purchaser in finding outlets or accounts for the purchaser’s products or services.
Represents that it will purchase any or all products made, produced, fabricated, grown, bred or modified by the purchaser using in whole or in part the supplies, services or chattels sold by the seller to the purchaser; or
Guarantees that the purchaser will derive income from the business opportunity which exceeds the price paid for the business opportunity, or that the seller will refund all or part of the price paid for the business opportunity, or repurchase any of the products, equipment, supplies or chattels supplied by the seller, if the purchaser is not satisfied with the business opportunity; or
Represents that the seller will provide a sales program or marketing program which will enable the purchaser to derive income from the business opportunity which exceeds the price paid for the business opportunity. 815 ILCS 602/5-5.10.

Illinois Business Opportunity Registration

The sale of business opportunities in Illinois requires a Written Disclosure Document, consent to service of process, and the required fee.

Illinois Business Opportunity Franchise Exemption

Franchises are excluded from the Business Opportunities Laws. (815 ILCS 602/5-10).

You can access the Business Opportunities Securities by clicking here.

If you offer a business opportunity in Illinois, we can help you determine if, and how, your company must comply with Illinois’s Franchise or Business Opportunity Laws.

Want to learn more about our franchise services and franchising in Illinois? Contact Us or call (757)-263-4596 to schedule a consultation. You can also visit our interactive map to learn more about other state franchise laws.

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