North Carolina House Introduces New Franchise Bills
As reported in a recent International Franchise Association (IFA) franchise news update, the North Carolina House of Representatives introduced two bills of interest to franchisors doing business in the state.
The first bill (House Bill 2036) if passed, would require the pre-sale registration of franchisors. HR 2036 would also create a private cause of action by allowing franchisees to sue franchisors who violate the law (for instance by not registering with the North Carolina Secretary of State or giving false or misleading disclosures to franchisees).
The second bill (House Bill 2001), would create additional annual state filing requirements. Similar to the New York reporting law enacted in 2009, HR 2001 is a franchise sale information reporting rule requiring disclosure by a franchisor each year of “the gross sales of each franchise located in the state, as reported by the franchisee to the franchisor; the total amount of sales by the franchisor to the franchisee, itemized by franchisee; and the income of each franchise located in North Carolina.”
It is likely that the enactment of “franchise sale reporting laws” will become more popular as state legislatures look for ways to generate revenue. State taxing authorities are able to use this information to assure that they are collecting all of the state corporate and sales taxes to which they are entitled.
Franchisors with outlets located in North Carolina are encourage to check back in the coming months to see whether these bills are enacted so they can comply with the legal requirements and avoid inadvertently violating North Carolina state law.
