Effective October 1, 2023, North Carolina streamlined franchisor compliance with the North Carolina Business Opportunity Act. The adopted revisions to the North Carolina Business Opportunity Act (“Act”) proposed by the North Carolina Business Law Section task force led by the author eliminate the 40+ year burden imposed on franchisors who are otherwise compliant with the FTC Franchise Rule but are considered business opportunities under North Carolina law because they lack a federally registered trademark.
Under prior law, these subset of franchisors would be required to provide a prospect with a North Carolina specific business opportunity disclosure (“Business Opportunity Disclosure”) in addition to the Federal Trade Commission required franchise disclosure document (“FDD”). A compliant FDD contained substantially all the disclosures required by the Business Opportunity Disclosure resulting in needless redundancy, opportunities for disclosure errors, and unnecessary legal expenses.
Now, those franchisors who provide a compliant FDD and lack a federally registered trademark will be able to use their FDD together with a state specific cover page to meet their North Carolina business opportunity disclosure obligations. The filing requirement with the North Carolina Secretary of State for these franchisors otherwise remains the same. Nothing changes for franchisors who already license franchisees a federally registered trademark.
As the first state to adopt a business opportunity statute, many state business opportunity statutes are patterned after North Carolina’s statute. Hopefully, other states will examine how North Carolina has modernized the Act to facilitate commerce with a streamlined disclosure process easily transferrable to other states.
