Illinois is known as a franchise registration state and has enacted its own franchise laws. Under these laws, before anyone can offer or sell a franchise in the state, they must first register the franchise disclosure document (FDD) with the Franchise Bureau of the Illinois Attorney General. This Bureau oversees this registration process and the enforcement of state franchise laws.
Creating a Franchise in Illinois
In Illinois, three elements need to be present to create a franchise. These elements include the following:
- Trademark Association: The franchisee needs to be significantly associated with the franchisor’s symbol or trademark. However, courts will look into this element broadly, and if they find that the franchisee’s customers make their judgments on the franchisor’s reputation, this element will be satisfied.
- Marketing Plan Association: To determine if a common marketing plan exists, the court will make a determination based on individual circumstances. Courts will typically look at whether the franchisor provided promotional materials, an operating manual, and training for the franchisee.
- Fees Paid: Whether a fee was labeled as a franchise fee or not, continuous payment will usually satisfy this element.
Registering a Franchise in Illinois
Under federal law, franchisors are not required to register their franchises. However, in Illinois, the state laws mandate franchise registration. Prior to selling or offering to sell a franchise in the state, the franchisor will need to furnish the franchisee with an up-to-date and appropriately registered Franchise Disclosure Document. In addition, this registration will need to be renewed annually.
To register an FDD, the franchisor will need to provide the following documents:
- A Uniform Franchise Registration Application Page
- Supplemental Information Pages
- A Sales Agent Disclosure Form, which will disclose every agent that was hired by the franchisor
- The Consent to Service of Process
- Auditor’s Consent Letter
- The Certification Page
- A current Uniform Franchise Offering Circular (“UFOC”)
- $500.00.
In addition, whenever there is a change in the material information, the UFOC must be updated, and an amended version must also be filed with the Franchise Bureau. Material information refers to any information that a franchisee would need to review before making a decision about investing in the franchise.
Violating State Franchise Laws
The Illinois Franchise Disclosure Act of 1987 (“IFDA”) allows individuals in Illinois to take legal action if the IFDA is violated. According to Section 705/26 of the IFDA, anyone who violates the IFDA by offering, selling, terminating, or failing to renew a franchise is responsible for any damages caused by the violation. The IFDA also holds principals, directors, and officers of the franchisor personally liable if they were aware of or should have been aware of the violation. Successful franchisee claimants under the IFDA are entitled to attorneys’ fees and costs.
The most common types of violations of franchise laws in Illinois include:
- Not providing a timely UFOC
- Providing an unregistered franchise
- Offering an incomplete UFOC with missing disclosures
- Not terminating the franchise properly
- Not renewing the franchise
- Making misrepresentations to potential franchisees
However, to better understand these rules or what these violations entail, contact an experienced franchise law attorney. These legal professionals can review the differences between violating state and federal franchise laws and what your options are in these circumstances.
Learn More About Franchise Laws in Illinois, Contact FortmanSpann Today
FortmanSpann is one of the few firms in the United States experienced in franchise law. It focuses on representing franchisees’ rights and offering reasonably priced, high-quality legal representation.
If you would like further information about franchise laws in Illinois or to discuss your situation in more detail, contact FortmanSpann today and speak with our experienced franchise attorneys.