3.2.23 Washington

Fees

*Renewal filings must be submitted before the expiration date or Washington 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 Washington until the amended FDD is approved and the registration is effectively amended.

Notes

• Washington filings are completed online through their state portal, and the filing fees are paid through the portal via ACH or credit card. For ACH payments, you will be required to complete and submit an ACH authorization form to us before we will submit the filing for you.  For credit card payments, you will be required to complete and submit a credit card authorization form to us before we will submit the filing for you.
• If you are a first-year start-up franchisor, Washington will accept the inclusion of unaudited financials in your FDD, but then will usually impose a financial assurance.
• No deals may be closed in Washington until the initial, renewal or amendment filing is approved and all Washington prospects must be disclosed/redisclosed with the approved FDD.
• Franchise brokers are required to be registered with Washington in order to conduct sales on your behalf in the state. If you are using brokers in Washington, it is the broker’s responsibility to apply for registration and pay the fee.  Washington will require submission of an Appointment of Franchise Broker form from you to state the broker is working on your behalf in Washington, and the form must include the broker’s file number.
• If we are filing your initial, renewal or amendment in Washington and it is more than 120 days after your fiscal year end, the state will require the inclusion of unaudited financials in the FDD to supplement the audit.
• Advertising – Any advertising that will be used by you to target prospects in Washington or will be published and used only in Washington, must be filed with the state at least seven days prior to its first use. If we do not receive a comment or response from the state on the filing in those seven days, you are free to use the advertising.
• Financial Assurance – As a condition of approval of the registration, the Washington director may require the escrow or impound of initial fees if he or she finds it necessary to protect prospective franchisees. In certain circumstances, the director may allow other methods of financial assurance such as a guarantee of performance by a parent or affiliate, posting of a surety bond, or fee deferral.

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

• Large Franchisor – exemption from registration only
  • Both the net worth requirement and experience requirement must be met:
    1. Net Worth:  You must have a net worth of at least $5,000,000 or at least $1,000,000 if you are 80% owned by a parent company with at least $5,000,000 net worth
    2. Experience: You or your 80% owner must have at least 25 franchisees conducting business at all times during the immediately preceding five-year period or you or your 80% owner must have conducted business that is the subject of the franchise continuously for at least five years
  • The initial investment required by franchisees must be more than $100,000 and you must not have had any violations of Washington business law, or any similar federal law, within the prior seven-year period
  • We must submit a filing each year to maintain this exemption
  • Fees:
    

    $100	Initial
    $100	Renewal

• Large Franchisee – exemption from registration and disclosure
  • Where the buyer satisfies the definition of “accredited investor”
  • an entity not formed solely to acquire the franchise as having total assets in excess of $5,000,000
  • an individual with net worth of more than $1,000,000 (not including primary residence) or who along with his or her spouse meets that net worth threshold (excluding personal residence)
  • an individual with income in each of the prior two years of more than $200,000 or joint income with his or her spouse of more than $300,000 and where there is a “reasonable expectation” to achieve income to meet that threshold in the year in which the franchise is being bought
  • a trust with more than $5,000,000 in total assets and not formed solely to purchase the franchise and where the purchase of the franchise is directed by a “sophisticated person”
  • an entity where all the equity owners satisfy the “accredited investor” definition
  • No filing or fees are required
• Insiders – exemption from registration and disclosure
  • Insiders are any director, executive officer, or general partner of yours or any director, executive officer, or general partner of a general partner of yours and are considered “accredited investors” (see Large Franchisee exemption above) under Washington law
  • No filing or fees are required
• Sales to Existing Franchisees – exemption from registration and disclosure
  • Sale must be (1) for the franchisee’s own account, (2) franchise must be substantially the same as the franchise the franchisee has operated for at least two years, and (3) the original sale must have been offered while you were registered for that offering in Washington
  • No filing or fees are required
• Isolated Sales – exemption from registration only
  • Exemption may be applied as long as you (1) have not granted any franchises outside Washington, (2) do not grant more than three franchises within Washington, and (3) have not and do not publicly advertise the franchise offering. The prospect(s) must be advised on the sale(s) by independent legal counsel or a certified public accountant.
  • You must not have had any violations of Washington business law, or any similar federal law, within the prior seven-year period
  • No filing or fees are required
• Sales by Existing Franchisees – exemption from registration and disclosure
  • Where the franchisee is not an affiliate of yours, the entire franchise is being sold, and the sale is not effected by or through you
  • No filing or fees are required
• Sales by Executor, Trustee, Etc. – exemption from registration and disclosure
  • Where the offer or sale of the franchise is by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, conservator, or pursuant to a court-approved offer or sale as long as the sale is being done for someone other than you or your estate
  • No filing or fees are required
• Sales to a Bank – exemption from registration and disclosure
  • Where the offer or sale is to a bank, savings institution, trust company, insurance company, investment company, pension or profit-sharing trust, other financial institution, or broker dealer where the buyer is acting for itself or in a fiduciary capacity
  • No filing or fees are required
• Out-of-State Sales – exemption from registration and disclosure
  • Where an offer is:
    • Not directed into Washington
    • Not originating from Washington
    • To a prospect who is not a resident of Washington, or
    • For a franchise that will not be located or operated in Washington
  • Where a sale is:
    • Not accepted in Washington
    • An offer not originating from Washington
    • With a prospect that is not a resident of Washington
    • For a franchise that will not be located or operated in Washington
  • 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
  • By Order
  • Motor Vehicle Dealerships
  • Bank Credit Card Plans
  • Businesses Regulated by Insurance Commissioner