South Dakota
Franchise Registration
South Dakota
South Dakota is a franchise registration and business opportunity law state.
South Dakota Franchise Laws
South Dakota defines a franchise as any “continuing commercial relationship or arrangement” where:
- The franchisee will obtain the right to operate a business that is identified or associated with the franchisor’s trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor’s trademark;
- The franchisor will exert or has authority to exert a significant degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation; and
- As a condition of obtaining or commencing operation of the franchise, the franchisee makes a required payment or commits to make a required payment of $500 or more to the franchisor or its affiliate. S.D. Codified Laws § 37-5B-1.
South Dakota Franchise Registration Filing
South Dakota is a franchise registration state that requires filing the Franchise Disclosure Document (“FDD”) with the state.
The initial filing fee is $250 and must be accompanied by the following documents:
- South Dakota Notice Filing Application
- Uniform Franchise Consent to Service of Process
- Corporate Acknowledgment
- A Clean Copy of the Franchise Disclosure Document
South Dakota Fee Deferrals
South Dakota 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. S.D. Codified Laws § 37-5B-5.
South Dakota does have a Surety bond and Escrow option. The Escrow option requires a bank with branches in South Dakota to serve as an Escrow Agent. The Escrow option requires both South Dakota and Franchisee Approval to release funds. S.D. Codified Laws § 37-5B-5.
Since South Dakota 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.
South Dakota Franchise Renewals
South Dakota registrations should be renewed 30 days before the one-year anniversary of the registration date.
The renewal filing fee is $150 and must be accompanied by the following documents:
- South Dakota Notice Filing Application
- Uniform Franchise Consent to Service of Process
- Corporate Acknowledgment
- A Clean and Marked Copy of the Franchise Disclosure Document
South Dakota's Franchise Relationship and Termination Laws
There are no franchise laws that specifically govern the franchise relationship or termination of a franchisee in South Dakota.
More Information About South Dakota's Franchise Laws
More information on South Dakota franchise laws can be found here: South Dakota Franchise Registration Laws
South Dakota Business Opportunity Laws
South Dakota also has Business Opportunity Laws, which define “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. S.D. Codified Laws § 37-25A-1
South Dakota Business Opportunity Requirements
The sale of business opportunities in South Dakota requires a Written Disclosure Statement, surety bond or escrow account, and written agreement.
South Dakota Franchise Exemption from Business Opportunity Laws
Franchises are excluded from the Business Opportunities Laws. S.D. Codified Laws § 37-25A-3.
More Information about South Dakota's Business Opportunity Laws
You can access the Business Opportunities Securities by clicking here.
If you offer a business opportunity in South Dakota, we can help you determine if, and how, your company must comply with South Dakota’s Franchise or Business Opportunity Laws.
Want to learn more about our franchise services and franchising in South Dakota? 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.
Client Recommendations
