3.2.12 Minnesota

Fees

*Renewal filings must be submitted within 120 days after your fiscal year end or Minnesota will require the filing be resubmitted as a new initial filing with payment of the initial fee.  The filing fee is $300 for each renewal filing that includes a material change, and in general, this will be the case for your renewals.  Your Spadea legal team will advise you should you qualify for a $200 filing fee (available in cases where your renewal filing does not include a material change).

**Post-Effective Amendment filings must be submitted if you are making a material change to your FDD after your initial or renewal filing is approved.  Pre-Effective Amendment filings are submitted if you are making a material change to your FDD but your initial filing or renewal filing is not yet approved.  No further sales may be made in Minnesota until the amended FDD is approved and the registration is effectively amended.

Notes

• Minnesota requires notary on the application required for each filing.
• The filing fees for all filings must be made via check payable to “Minnesota Commerce Department”.
• Audited financials are required for initial and renewal filings in Minnesota. The state may also require the submission of unaudited financials to supplement the audit in certain circumstances.
• No deals may be closed in Minnesota until the initial, renewal or amendment filing is approved, and all Minnesota prospects must be disclosed/redisclosed with the approved FDD.
• Financial Assurance – If the Commissioner finds there is a lack of adequate financial arrangements to fulfill obligations to the franchisees, the Commissioner may require the escrow, impoundment, or deferral of franchise fees until the franchised business has opened to the public. In certain circumstances, the Commissioner may allow the posting of a surety bond in lieu of the other forms of financial assurance.
• Advertising – Any advertising that will be used by you to target prospects in Minnesota or will be published and used only in Minnesota must be filed with the state at least five days prior to its first use. If the state does not provide written disapproval within three business days from the filing date, the advertising may be used.

Exemptions (from registration with the state and/or from disclosure with a specific prospect)

• Fractional Franchises – exemption from registration and disclosure
  • Where franchisee or any of the principal officers or directors of the franchisee have been in the type of business represented by the franchise relationship for more than two years and the parties anticipated, or should have anticipated, at the date of the agreement establishing the franchise relationship, that the sales arising from the relationship would represent no more than 20% of the dollar sales volume of the franchisee
  • No filing or fees are required
• Sales to Existing Franchisees – exemption from registration and disclosure
  • Where you are offering or granting of additional franchises to an existing franchisee, unless the additional franchise varies substantially from the existing franchise (i.e., different products, services, fees, duties, obligations, or investments)
  • No filing or fees are required
• Renewal of an Existing Agreement – exemption from registration and disclosure
  • Where you are extending or renewing an existing franchise unless the additional franchise varies substantially from the existing franchise (i.e., different products, services, fees, duties, obligations, or investments)
  • No filing or fees are required
• Isolated Sales – exemption from registration and disclosure
  • All of the following conditions must be met:
    • Where you make only one sale in any period of 12 consecutive months
    • Where you have not advertised the franchise to general public and via mass media methods
    • Where you deposit all initial franchise fees, within two days of receipt, in an escrow account (with a Minnesota bank) until all pre-opening obligations of yours are satisfied
    • Where you file notice with the Commissioner no later than 10 business days prior to the sale
    • This exemption cannot be applied to multi-unit or area sales
    • A no-fee notice filing is required which may include a request to waive the escrow requirement, which may or may not be granted
• Sales by Existing Franchisees – exemption from registration and disclosure
  • Where a franchisee or subfranchisor is selling its own franchise or entire subfranchise, and where the following criteria are met:
  • The sale is not effected by or through you
  • Only one sale by a franchisee or subfranchisor is allowed in any consecutive 12-month period
  • The buyer cannot be required to enter into a substitute franchise agreement
  • No filing or fees are required
• Sales by Executor, Trustee, Etc. – exemption from registration and disclosure
  • Any transaction by an executor, administrator, sheriff, receiver, trustee in bankruptcy, guardian, or conservator are exempt as these persons are, in their official capacities, viewed as judicial or quasi-judicial officers
  • No filing or fees are required
• Out-of-State Sales – exemption from registration and disclosure
  • All of the following criteria must apply:
  • The franchisee is not domiciled in Minnesota
  • The franchisee is not present in Minnesota during the offer or sale
  • The franchised business will not be operated “wholly or partly” in Minnesota
  • The sale must not violate the law of a foreign jurisdiction having an interest in the transaction
  • No filing or fees are required
• Non-Franchisor Exemptions – The following exemptions are for atypical franchise offerings, are very rare, and in general, will not apply to you if you are an active franchisor with an FDD.
  • Nominal Fee
  • Leased Department
  • Banking Organization, Financial Organization or Life Insurance Corporation
  • Motor Vehicles for use on Public Highways
  • Securities Registered in Minnesota
  • Freight Movers and Household Goods Movers
  • Marketers of Motor Vehicle Fuel
  • By Order