In some countries, franchisors (or franchisees) must complete registration with a government agency. Failure to register can result in considerable fines or may render the franchise agreement unenforceable. 

Generally, registration is aimed at providing a higher level of transparency for current and prospective franchisees in the relevant market. Often, the franchise registration is published and includes a copy of the franchise disclosure document. In other countries, registration is predominantly a government tool to ensure compliance with local law enforced by fines and, in extreme cases, criminal prosecution. If not registered, the franchise agreement may be void, in which case, the franchisor could face damages claims from the franchisee, including a refund of all fees paid along with damages for wasted investment.

In which countries must I register?

Approximately 26 countries in the world require franchise registration. These are found primarily in the Americas and the Asia-Pacific region. 
In the United States of America, there are 14 so-called Registration States which are: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin.

In Asia, six countries require registration, including: China, Korea, Vietnam, Thailand, Indonesia and Malaysia.

In the Middle East, all GCC States have a commercial agency law enabling the franchisee to register. Currently, in Oman, Kuwait and Saudi Arabia registration is mandatory. The registration of trademark license agreements is usually optional but can have certain advantages such as clear evidence of permitted use.

A complete list of countries with franchise registration laws is included at the end of this article.

Sometimes, registration is beneficial to the franchisee. This is predominantly the case in the Middle East, where the franchisee may attempt to register itself as the commercial agent of the franchisor. Such registrations are best avoided but may be mandatory in certain cases e.g. for the local enforcement of the franchise agreement.

What do I have to register?

The registration requirement varies from country to country. In some jurisdictions, registration requires both the franchise agreement and the franchise disclosure document to be registered, in others it is the company (franchisor or franchisee) that registers itself. Sometimes it is only the underlying trademark license that requires registration.  It is best to consult legal counsel to understand the specific requirements in the countries in which you operate.

When do I have to register?

In some countries, registration can be made up to three months after executing the franchise agreement. Examples include the Kingdom of Saudi Arabia and the People’s Republic of China. In other countries, the franchisor is required to register before it starts offering franchises in the territory.  This is the case in the United States of America, Korea, Vietnam and Malaysia. 

It is also not always the franchisor, which is obliged to register in accordance with the local laws. Sometimes the franchisee must register, such as in Indonesia and Saudi Arabia.

How long does franchise registration take?

The length of the process varies- it can take as little as 30 days or as long as 12 months in extreme circumstances. Hence, it is crucial that a franchisor, which plans to enter a new market takes this into account and adjusts its timeline accordingly to avoid any unpleasant surprises. The preparation of the paperwork can be time consuming as detailed submissions must be made to the relevant authorities. It is not uncommon for authorities to raise queries and request clarifications and amendments before accepting the franchise for registration. 

We typically recommend to allow between four and six months for the process.

Exemption from registration

Sometimes it is possible to obtain an exemption from the franchise registration requirement, if the franchise is a one-off agreement and you are not a regular franchisor. Other exemptions can be available for deals between very large companies or for entering into the same franchise agreement with the same franchisee, but for a new unit. Exception-based franchising is, however, a legal minefield and you should seek professional advice before relying on this option.

What should I do if I am franchising in a state or country that requires registration?

Before franchising in a franchise registration territory, you should obtain a red flag report from a specialist franchise advisor to understand the timeline, volume of documentation and cost involved in franchise registration. 

The global franchise team at Dentons would be delighted to assist further. For further information on franchise registration laws please contact Babette.Mwood@dentons.com.

List of countries requiring registration:

1. Armenia
2. Azerbaijan
3. Barbados
4. Brazil
5. Cabo Verde
6. China
7. Democratic Republic of the Congo
8. Indonesia
9. Iraq
10. Kazakhstan
11. Liechtenstein
12. Lithuania
13. Malaysia
14. Mexico
15. Moldova
16. Pakistan
17. Romania
18. Russia
19. Saudi Arabia
20. South Africa
21. South Korea
22. Thailand
23. Uganda
24. United States of America
25. Vietnam
26. Zimbabwe