What to Do if You’re a Utah Small Business Entering Into a Franchise Agreement Legal Checklist
Disclosure timelines, fees, territory rights, Utah registration, and when to bring in counsel
Entering into a franchise can open big opportunities but also serious obligations. This guide explains the key legal steps Utah small-business owners should take before signing a franchise agreement, including disclosure timelines, fees, territory rights, and when to seek legal help.
Understanding Franchise Agreements in Utah
A franchise agreement is a binding contract between a franchisor and a franchisee. It sets what you can sell, how you can market it, what fees you owe, and how you operate day to day.
Franchise law is both federal and state. The Federal Trade Commission sets nationwide disclosure standards, while Utah adds state registration and compliance requirements for franchisors.
FTC Franchise Rule: 14-Day Disclosure
Before you sign or pay, the franchisor must provide a Franchise Disclosure Document at least 14 days in advance. Use this window to review and get legal and financial advice.
Utah Registration & Annual Renewal
Utah requires franchisors to register before offering or selling in the state. The core statutes are Utah Code §§ 13-15-1 through 13-15-6. Operating without registration or using misleading materials can trigger penalties or restitution.
Franchise registrations in Utah must be renewed annually. You can check a franchisor’s status using the Utah Division of Consumer Protection’s Business Lookup.
Common Franchise Fees & Financial Commitments
- Initial franchise fee: one-time entry cost.
- Royalties: ongoing percentage of gross sales, often 4–8%.
- Marketing fund: monthly or quarterly contributions.
- Technology, renewal, transfer: platform and long-term costs.
Request the total investment range and whether fees can change during the term.
Territory Rights, Renewal & Transfer Terms
Your territory drives revenue potential. Look for clear boundaries, exclusivity, and limits on nearby locations or online sales. Confirm renewal benchmarks and what it takes to sell or transfer your unit later.
Negotiating & Reviewing the Contract
Franchise papers are often presented as standard, but targeted changes are possible, especially on territory clarity, renewal conditions, and certain fees. Have a Utah franchise or business attorney review for:
- Escalating fee clauses or add-on costs
- Broad termination rights
- Distant arbitration locations or unfavorable governing law
- Restrictions that box in exit options
Even a short consult can prevent costly mistakes.
Q&A: Common Utah Franchise Questions
Q: How is a franchise different from licensing?
A: Franchises include brand use plus significant franchisor control over operations. A simple license is usually brand or IP use without operational control.
Q: Does Utah require yearly registration?
A: Yes. Franchisors must renew annually with the Division of Consumer Protection.
Q: Can I cancel after signing?
A: Usually not without penalties. Some systems allow short rescission, but most contracts bind once executed.
Q: What if a franchisor never registered in Utah?
A: Remedies may exist under Utah Code §§ 13-15-1 through 13-15-6, including possible cancellation or restitution. Contact a Utah attorney or the Division of Consumer Protection.
Q: Are there Utah rules on franchise advertising?
A: Yes. Advertising cannot be false or misleading and should align with approved disclosures.
Video & Social Learning Hub
YouTube: Franchise & Utah Business Setup
Need Help Applying This to Your Situation?
Before you sign, review the FDD carefully, confirm Utah registration, and get Utah-specific legal advice. A clear read of duties and costs protects your investment.
Talk to a Utah AttorneyUtah Law Explained provides legal information, not legal advice. For personalized guidance, speak with a qualified Utah attorney.