Amendment to Definition of Franchise in Illinois Considered

If enacted, Illinois House Bill 3977 would amend the definition of “franchise” in the Illinois Franchise Disclosure Act. Currently, this definition includes the concept that a franchisee must be required to pay, directly or indirectly, a franchise fee of $500 or more. The potential legislation would amend this provision to provide that the franchisee would be required to pay the franchisor or an affiliate of the franchisor a fee of $500 or more, prior to or within the first six months of the commencement of the franchise business.

Significantly, this bill would also exempt franchise sellers (as defined under the FTC’s Amended Rule) from the provisions requiring franchise brokers to register and pay a fee in Illinois prior to selling franchises, and repeals other provisions related to brokers. The bill also would repeal the current provision creating a franchise advisory board, as well as amend provisions concerning the sale and extension or renewal of an existing franchise, amendments to the exemption provisions, registration and annual reports, amendments to disclosure statements, the deferral of payment of the initial franchise fee, and other matters.

The bill also contemplates certain changes to the Business Opportunity Sales Law in Illinois.

To view the text and status of the bill, click here.