Texas
Franchise Registration
Texas
Texas is not a franchise registration state. However, many franchise offerings fall within the definition of a business opportunity under Texas law. As a result, franchisors whose franchise offerings qualify as business opportunities under Texas law must either file a one-time Business Opportunity Exemption Notice or, if the exemption does not apply, register as a business opportunity seller.
Texas does not require franchisors to register a Franchise Disclosure Document (FDD) before offering or selling franchises. However, franchisors must comply with the Federal Trade Commission (FTC) Franchise Rule, which requires providing a current FDD to prospective franchisees at least 14 calendar days before execution of any agreement or payment of any consideration.
Texas does not have franchise relationship or termination laws. The terms of the franchise agreement and general contract law principles govern franchise relationships, renewals, transfers, and terminations.
Texas Business Opportunity Laws
Texas regulates business opportunities under the Texas Business Opportunity Act, Chapter 51 of the Texas Business & Commerce Code. Under Tex. Bus. & Com. Code § 51.003(a), a “business opportunity” is a sale or lease, for an initial consideration of more than $500, of products, equipment, supplies, or services that will be used by or for the purchaser to begin a business, in which the seller represents that:
- The purchaser will earn or is likely to earn a profit exceeding the initial consideration paid; and
- The seller will (i) provide a location or assist the purchaser in finding a location, (ii) provide a sales, production, or marketing program, or (iii) buy back products, equipment, or supplies purchased by the purchaser or products made or produced by the purchaser.
“Initial consideration” includes amounts the purchaser is obligated to pay before or at the time of delivery or within six months after the purchaser begins operating the business. Tex. Bus. & Com. Code § 51.002.
Texas Business Opportunity Registration Requirements
If an offering meets the statutory definition of a business opportunity and no exemption or exclusion applies, the principal seller must register the business opportunity with the Texas Secretary of State before any advertising, offer, or sale. Tex. Bus. & Com. Code § 51.051. Registration requires:
- Filing the disclosure statement and list of sellers required by Tex. Bus. & Com. Code §§ 51.051–51.054;
- Providing a surety bond, trust account, or letter of credit as required by Tex. Bus. & Com. Code § 51.101; and
- Paying the $195 registration filing fee.
Registered sellers must update the list of individual sellers every six months and update the disclosure statement annually and whenever there is a material change. The filing fee for updates, renewals, and amendments is $25.
Texas's Franchise Exemption from Business Opportunity Laws
Franchisors who meet the FTC definition of a franchise and comply with the FTC Franchise Rule are exempt from Texas’s business opportunity registration requirements if they file a Business Opportunity Exemption Notice (Form 2703) with the Texas Secretary of State, as provided by Tex. Bus. & Com. Code § 51.003(b)(8).
This exemption applies only when the franchisor:
- Meets the FTC's definition of a franchise;
- Has complied in all material respects with the FTC Franchise Rule and FTC orders or actions; and
- Files the required Business Opportunity Exemption Notice before offering or selling a franchise in Texas.
Requirements for Submitting a Texas Exemption Notice
To obtain the franchise exemption, franchisors must submit a one-time Business Opportunity Exemption Notice (Form 2703) and pay a $25 filing fee. Texas does not require a copy of the FDD with the exemption filing and does not require annual renewal. If the franchisor’s principal business address changes, the franchisor should notify the Secretary of State in writing.
More Information About Texas's Business Opportunity Laws
For more information on Texas’s business opportunity requirements, visit:
Texas Business Opportunity Statutes
Texas Business Opportunity Exemption Notice (Form 2703)
If you offer a business opportunity or franchise in Texas, we can help you determine whether and how your company must comply with Texas’s Business Opportunity Laws.
Franchise Compliance in Texas
To learn more about our franchise services and how we can assist with franchise compliance in Texas, please contact us at (757) 263-4596 or visit our interactive map to explore franchise laws in other states.
