3.2.16 North Dakota

Fees

*Renewal filings must be submitted before the expiration date or North Dakota may require the filing be resubmitted as a new initial filing with payment of the initial fee.

**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 North Dakota until the amended FDD is approved and the registration is effectively amended.

Notes

• As of October 1, 2021, the required method for filing in North Dakota is through an online portal created by the industry for registration states. The filing fees are also paid through the portal via ACH.  You will be required to complete and submit an ACH authorization form to us before we will submit the filing for you.  Transaction fees apply for each filing with the current rate being $100 per.
• North Dakota will accept unaudited financials in lieu of an audit (in your FDD) from first-year startup franchisors but will automatically impose a financial assurance.
• No deals may be closed in North Dakota until the initial, renewal or amendment filing is approved, and all North Dakota prospects must be disclosed/redisclosed with the approved FDD.
• Advertising – All advertising to be used in North Dakota or targeted to North Dakota prospects must first be filed with the state at least five business days prior to use. If no rejection of the advertising is received in those five business days, you are free to use the advertising.
• Financial Assurance – If the state determines you do not have adequate financial resources available to you to perform your obligations to franchisees, you will be required to institute a form of financial assurance. In most cases, North Dakota will allow your choice of escrow, guarantee of performance, posting of a surety bond or fee deferral.

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

• Large Franchisors – exemption from registration only
  • You must satisfy five criteria:
    • Net worth of at least $10,000,000 or $1,000,000 with a parent having net worth of at least $10,000,000
    • Experience in the business of the franchise through (a) at least 25 franchisees conducting such business for five years; or (b) you or your parent directly conducting such business for five years
    • Have a compliant FDD to provide to prospective franchisees
    • In case of an existing franchise, a writing identifying material modifications proposed to the franchise agreement and any other prescribed information that must be provided to the existing franchisee
    • Notice filing and payment of fee are required before the offer or sale
  • We must file a Notice with the North Dakota stating how you meet all the criteria for this exemption and we must pay the required fee. Renewal Notices are required to be filed annually.
• Renewal of an Existing Agreement – exemption from registration only

• Where the offer or sale is to an existing franchisee and the sale is (1) the renewal or extension of an existing franchise; and (2) there is no interruption in the operation of the franchised business by the franchisee
• No filing or fees are required
• Sales by Existing Franchisees – exemption from registration and disclosure
  • Where a franchisee is selling a franchise for its own account or where a subfranchisor is selling its entire area franchise for its own account and as long as the sale is not effected through you
  • No filing or fees are required except in the case where a subfranchisor is selling its entire area franchise (written approval from Commissioner may then be required)
• Out-of-State Sales – exemption from registration only
  • Where the offer and sale of a franchise is made entirely outside North Dakota and are not made to a North Dakota resident, even if the franchised business will be operated in North Dakota
  • 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
  • Co-Ops
  • By Order
  • Goods at Wholesale
  • Credit Card Payments
  • Trading Stamp Company