Last year, the North American Securities Administrators Association’s (NASAA) launched the Franchise Electronic Filing Depository System (“FRED”), the nationwide online filing portal for state franchise registration and exemption filings. Going into 2023 renewal season, California, Illinois, Maryland, Nebraska (exemption), Rhode Island, South Dakota and Virginia now all allow filing franchise submissions through FRED. New York and North Dakota require all franchise filings be submitted through FRED, although New York will consider accepting applications by mail due to hardship. Maryland, Nebraska, South Dakota and Virginia permit paper filings or the use of FRED. California and Rhode Island allow filers to utilize FRED or their state specific online portals for filing.
FRED does permit public access to documents filed on it and there is a search tool to assist in finding the desired franchisor by franchise name, franchisor name, or state file number.
Generally, franchise filers have been pleased with the resource, however, there are certainly some areas where practitioners feel there is room for improvement. Below is a list of recent constructive feedback we compiled regarding FRED from regular users with the hope of preparing filers for both the good and the not-so-good:
- Cost. FRED currently charges per state filing ($100 per initial filing and $50 per renewal). The “per state” fee structure can make using FRED more expensive for franchise systems even after accounting for federal express rates, copy costs and the time to prepare, compile and submit a hard copy filing (and those CD-ROMs!). Some users surveyed said they would prefer a “per offering” fee structure similar to the securities blue sky filings which are also submitted via an electronic depository system (EFD) administered by NASAA.
- Lack of Ability to Use Credit Cards. FRED does not current allow the use of credit cards for payments. Both the direct user fees charged by FRED as well as the state filing fees must be paid by using a Bank ACH. Users find this one of FRED’s largest inconveniences.
- Time It Takes to Submit Multiple Filings. If a filer has a uniform franchise disclosure document it uses for several or all states, then FRED allows the FDD to be loaded once for multiple states. However, that is where the uploading efficiency ends. Other than the FDD, each state requires its own separate uniform franchise registration application be loaded separately. In other words, even if the Form A (Uniform Franchise Registration Application), Form B (Costs and Sources of Funds) or Form C (Uniform Consent to Service of Process), is the same for each submission, a filer must still upload each form separately for each state. Additionally, a submitted response is required for each potential state specific form even if the form is not applicable to the franchise system applicant. For example, there is no option to respond “Not Applicable” to a prompt requiring the submission of a surety bond specific form when an additional financial assurance is not required in the state.
- Lack of Notification to Multiple Interested Parties. Only one party (the primary email on the account) is notified when a comment letter is issued or when an approval is granted. If an assistant or paralegal submits the filings through FRED and is tasked with monitoring the status of an application, but the supervising attorney is listed as the primary, then only the attorney will receive updates. Similarly, if outside counsel is submitting filings and listed as the primary, then only outside counsel (and not the in-house team) will receive updates. Typically, state franchise regulatory compliance is a team effort so the current structure requires non-primary account holders to check FRED on a daily basis while submissions are pending so he or she does not miss an update.
Despite the above hiccups, FRED is proving to be a much appreciated resource for streamlining the franchise state filing process.