LRB-3596/1
ARG:jld:pg
2007 - 2008 LEGISLATURE
December 21, 2007 - Introduced by Law Revision Committee. Referred to
Committee on Veterans and Military Affairs, Biotechnology and Financial
Institutions.
SB371,1,4
1An Act to amend 553.27 (4) of the statutes;
relating to: offering circulars
2provided to prospective franchisees under the franchise investment law
3(suggested as remedial legislation by the Department of Financial
4Institutions).
Analysis by the Legislative Reference Bureau
Under the state's franchise investment law, a person attempting to sell a
franchise must generally register the franchise offered for sale with the Division of
Securities (division) and provide a copy of an offering circular, in a form required by
the division or permitted under federal law, to the prospective franchisee at least ten
business days prior to the earlier of: 1) the prospective franchisee's execution of any
binding franchise or other agreement; or 2) the receipt of any consideration.
This bill specifies that the time period for the franchisor to provide a copy of the
offering circular to the prospective franchisee is at least 14 calendar days, rather
than ten business days, prior to the the earlier of: 1) the prospective franchisee's
execution of any binding franchise or other agreement with the franchisor or any
affiliate of the franchisor; or 2) the payment of any consideration to the franchisor
or any affiliate of the franchisor.
For further information, see the Notes provided by the Law Revision
Committee of the Joint Legislative Council.
Law Revision Committee prefatory note: This bill is a remedial legislation
proposal, requested by the Department of Financial Institutions and introduced by the
Law Revision Committee under s. 13.83 (1) (c) 4., stats. After careful consideration of the
various provisions of the bill, the Law Revision Committee has determined that this bill
makes minor substantive changes in the statutes, and that these changes are desirable
as a matter of public policy.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB371, s. 1
1Section
1. 553.27 (4) of the statutes is amended to read:
SB371,2,102
553.27
(4) No franchise subject to registration under this chapter may be sold
3in this state unless a copy of an offering circular is provided to the prospective
4franchisee at least
10 business 14 days prior to the execution by the prospective
5franchisee of any binding franchise or other agreement
with the franchisor or any
6affiliate of the franchisor or at least
10 business 14 days prior to the
receipt payment 7of any consideration
to the franchisor or any affiliate of the franchisor, whichever
8first occurs. The offering circular may be in a form that the division requires by rule,
9in a form permitted under
16 CFR 436 or in a form permitted by a successor to that
10regulation.
Note: After July 1, 2008, franchisors who offer and sell their franchises nationally
in multiple states must comply with a new FTC regulation requiring a franchisor to
provide a franchise disclosure document to a prospective franchisee at least 14 calendar
days before a binding franchise agreement is signed or any payment is made, whichever
first occurs. Wisconsin law requires the disclosure document to be furnished at least 10
business days before the signing or payment, reflecting the former FTC requirement.
This bill, by incorporating the new federal requirement into Wisconsin law, eliminates
the inconsistency between the two, assuring compliance with both.*
The pertinent FTC regulation provides:
In connection with the offer or sale of a franchise to be located in the United States
of America or its territories, unless the transaction is exempted under Subpart E of this
part, it is an unfair or deceptive act or practice in violation of Section 5 of the Federal
Trade Commission Act: (a) For any franchisor to fail to furnish a prospective franchisee
with a copy of the franchisor's current disclosure document, as describe in Subparts C and
D of this part, at least 14 calendar days before the prospective franchisee signs a binding
agreement with, or makes any payment to, the franchisor or an affiliate in connection
with the proposed franchise sale. [16 CFR s. 436.2 (a).]
*Until July 2, 2008, federal regulations allow franchisors to use either the 10-day
business day or 14-calendar day requirement.
