3.2.5 Illinois

Fees

*Renewal filings must be submitted within 120 days after your fiscal year end or Illinois will 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 Illinois until the amended FDD is approved and the registration is effectively amended.

Notes

• Illinois does not require notary on the application required for each filing.
• The filing fees for all filings must be made via check made payable to “State of Illinois”.
• If you are in your first year of franchising, Illinois will accept Compiled financials, but will automatically require a financial assurance if the equity is below $100,000. The state may also require the submission of unaudited financials to supplement the compiled or audited financials in certain circumstances.
• Financial Assurance – If the Administrator deems you to not have adequate funding to fulfill all your pre-opening obligations to a franchisee, or if Shareholders’ Equity is below $100,000, they will require some form of financial assurance be instituted, such as an escrow, impoundment or deferral of initial fees, or the posting of a surety bond. In some cases, the Administrator will allow other forms of financial assurance such as Certificate of Deposit or a Guaranty of Performance by a parent or affiliate company with strong financials.

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

• Large Franchisors – exemption from registration only
  • Three criteria must be met:
    1. Net worth:
       • Minimum net worth of $5,000,000 (audited)
       • Minimum net worth of $1,000,000 (audited) and parent has a minimum net worth of $5,000,000 (audited), OR
       • Minimum net worth of $1,000,000 (unaudited) and parent has minimum net worth of $5,000,000 (audited) and assumes the obligations under the Franchise Agreements if the franchisor defaults
    2. Experience
       • You or your parent has minimum of 25 active franchisees in system throughout five-year period preceding offer and sale
       • You may satisfy up to three of the five years of required experience if can demonstrate it has conducted a business that is “substantially the same” as the current franchise system
    3. Disclosure of the FDD is required
       • “Very large franchisor” – you may qualify without the experience requirement if:
         • Minimum net worth of $15,000,000 (audited) or not less than $1,000,000 (unaudited) and at least 80% owned by a corporation with minimum net worth of $15,000,000 (audited)
         • No filing is required under this exemption but disclosure of the FDD to prospects is still required
       • We must submit an initial filing and annual renewal filings in order to maintain this exemption, unless you have a minimum net worth of $15 million (see “Very large franchisor” above).
• Fees:

• Large Franchisee – exemption from registration only
  • Minimum net worth of $5,000,000 and has been in business for at least five years. Criteria may be met by the franchisee’s parent or any affiliates.
  • No filing and/or fees are required to utilize this exemption as it applies only to specific franchisees.

• Large Investment – exemption from registration only
  • Exemption applies if the sale is for a single-unit franchise and the minimum initial investment exceeds $1,000,000
  • We must submit a filing to the state in order for you to utilize this exemption, but no fee is required.
• Fractional Franchises – exemption from registration and disclosure
  • Where (1) franchisee or any of the current directors or executive officers of the franchisee has been involved, for more than two years, in the same type of business as the franchise, and (2) at the time the agreement is signed, the parties expect or should expect that for a period of at least one year after franchisee begins operation, the sales will be no more than 20% of the sales in dollar volume of the franchisee.
  • No filing or fees are required
• Insiders – exemption from registration only
  • Sale to individual who, within 60 days of the sale, has been an officer, director, general partner, individual with management responsibility for the offer and sale of your franchises, or the administrator of the franchised network, or an owner with at least 25% interest in you for at least two years.
  • No filing or fees are required
• Isolated Sales – exemption from registration and disclosure
  • This is a very rare exemption granted only by the Administrator in Illinois in situations where the sale is considered of “limited” and it is in the public interest. Registration and approval of your FDD via a normal franchise filing is quicker.
• Renewal of Existing Agreement – exemption from registration and disclosure
  • Where (1) an existing franchise is being renewed, extended, exchanged or a modified or amended franchise agreement is being substituted, and (2) where the franchise is continually operated by the franchisee
  • No filing or fees are required
• Sales by Bank – exemption from registration and disclosure
  • Offer or sale to any bank
  • 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
  • Certification Marks
  • By Order, Discretionary Exemption, or Interpretive Opinion
  • Petroleum Marketing