South Dakota Enacts New Franchise Disclosure/Registration Law

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

South Dakota has enacted a new franchise disclosure/registration law and has repealed its Franchises for Brand-Name Goods and Services Act.

The new law provides procedures and requirements for notice filing of franchises prior to the sale of a franchise in South Dakota, including the filing of a disclosure document as set forth in the FTC franchise rule—2007.

Exemptions

The statute specifies exemptions for franchises covered by the Petroleum Marketing Practices Act, franchises with no written document describing any material term or aspect of the relationship, fractional franchises, any leased department, franchises with required payments of less than $500 within six months after commencing the franchise's operation, and any franchise covering farm machinery, motor vehicles, or recreational vehicles.

Similar to the repealed statute, an anti-waiver provision renders void certain provisions in franchise agreements seeking to waive the provisions of the law, and the employment of any device, scheme, or artifice to defraud in the offer or sale of a franchise is prohibited.

Business Opportunity Law Amendments

In addition to providing a new franchise law, the enactment amends the South Dakota Business Opportunities Law to conform with the new disclosure/registration law and to the FTC business opportunities rule—2007.

Approved by the Governor March 17, 2008, the enactment (Senate Bill No. 52) becomes effective July 1, 2008. Text of the law appears here on the website South Dakota legislature. Further details regarding the legislative action appear here.