How2Day: Wisconsin's Franchise Laws

In a franchise, an independent businessperson pays a larger established business for the right to open a branch of the business, and receives technical and marketing assistance with business practices. Franchises in Wisconsin are governed by the Wisconsin Franchise Investment Law, the Fair Dealership Law and the Amended FTC (Federal Trade Commission) Franchise Rule..

The Wisconsin Franchise Investment Law requires a franchisor to register with the Division of Securities of the Department of Financial Institutions before any franchises are sold and to give a disclosure document to prospective franchisees. This law was passed in 1972 and originally required that the franchise circulars be approved by the Commissioner of Securities. However, amendments passed in 1996 removed this authority from the state government.

The Fair Dealership Law, passed in 1974, also applies to franchise agreements. This law promotes fair dealing between dealers and grantors (those who granted the dealership) and to protect dealers from being taken advantage of by grantors with superior bargaining power. This law overrides any contractual provisions that are inconsistent with it. The Fair Dealership Law prohibits grantors from canceling or changing a dealership agreement without good cause and the burden of proof is on them. Except in the case of insolvency, a grantor must give a dealer 90 days notice of cancellation of an agreement, with reasons for the cancellation and give the dealer 60 days to correct the reasons for the cancellation. Under this law, the dealer can force the grantor to buy back his inventory if the dealership agreement is cancelled. If the grantor violates this law, the dealer can get an injunction and recover damages and attorneys fees.

Only two state laws apply to franchises in Wisconsin, but one federal rule also applies: the Amended FTC Franchise Rule. This rule requires disclosure statements from franchisors and sets requirements for what should be contained in this document. States can impose additional disclosure requirements that are consistent with this rule. However, when the rule took effect in 2008, it required a different disclosure form than the one that had been used in Wisconsin, requiring that the Wisconsin form be updated to comply with the federal rule. Franchisors who sell in Wisconsin, can, as of 2010, use either the federal form or the updated state form.

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