An Overview of Franchise Law in Minnesota | MN Franchise Act

What Counts as a Franchise in Minnesota

Under Minnesota’s principal definition, a franchise exists only when three elements are all present. Minn. Stat. § 80C.01, subd. 4(a)(1). First, the franchisor grants you the right to engage in the business of offering or distributing goods or services using the franchisor’s trade name, trademark, service mark, logotype, advertising, or other commercial symbol or related characteristics. Second, the franchisor and franchisee share a community of interest in the marketing of those goods or services. Third, you pay, directly or indirectly, a franchise fee. If any one of the three is missing, the relationship falls outside the Act.

This is not a dated framework. The Minnesota Supreme Court has applied this same three-element test, and it remains the controlling standard. Current Technology Concepts, Inc. v. Irie Enterprises, Inc., 530 N.W.2d 539, 542 (Minn. 1995).

The Community of Interest Element

The statute does not define “community of interest.” The Minnesota Supreme Court supplied the meaning: a shared financial interest between franchisor and franchisee in the marketing of the goods or services, such as sharing fees from a common source. Martin Investors, Inc. v. Vander Bie, 269 N.W.2d 868, 874-75 (Minn. 1978). The bar is low. The court held that the definition contains no substantiality requirement, and it found no merit in the argument that a 1 percent share of loan proceeds was too small to create a community of interest. So even a modest shared financial stake in the marketing can satisfy this element.

What Counts as a Franchise Fee

The franchise fee is “any fee or charge that a franchisee . . . agrees to pay for the right to enter into a business or to continue a business under a franchise agreement.” Minn. Stat. § 80C.01, subd. 9. The definition sweeps in far more than an up-front payment: an initial capital investment fee paid in a lump sum or by installments, fees based on a percentage of gross or net sales (whether or not called royalties), payments for goods or services, and training fees.

Six things do not count as a franchise fee: bona fide wholesale purchases of goods; consignment purchases that reflect only the wholesale price; repayment of a bona fide loan from the franchisor; bona fide retail purchases under a commission plan that in substance reflects a wholesale transaction; fair market purchases of necessary supplies or fixtures; and the fair market purchase or lease of necessary real property. Minn. Stat. § 80C.01, subd. 9.

There is also a floor. A relationship that requires you to pay less than $100 on an annual basis is not a franchise, except for the motor vehicle fuel franchises the statute identifies. Minn. Stat. § 80C.01, subd. 4(c).

When the Minnesota Franchise Act Applies

The Act’s provisions on sales and offers to sell apply when a sale or offer to sell is made in Minnesota, when an offer to purchase is made and accepted in Minnesota, or when the franchise is to be located in Minnesota. Minn. Stat. § 80C.19, subd. 1. An offer is “made in this state,” whether or not either party is physically present here, when it originates from Minnesota or is directed by the offeror to Minnesota and received by the offeree here. Minn. Stat. § 80C.19, subd. 2. That reaches an out-of-state franchisor who directs an offer into Minnesota. An offer that reaches Minnesota only through an out-of-state newspaper of general circulation, or an out-of-state radio or television broadcast, does not count. Minn. Stat. § 80C.19, subd. 4.

Registering a Franchise With the Department of Commerce

No person may offer or sell a franchise in Minnesota unless an effective registration statement is on file with the Department of Commerce, or the franchise or transaction is exempt. Minn. Stat. § 80C.02; Minn. Stat. § 80C.03. Not every franchise must be registered: the statute expressly exempts qualifying franchises and transactions.

Registration is not permanent. A registration is effective for 12 months from the date the commissioner’s order is issued, and you must file an annual report (on the form the commissioner prescribes) with a $200 fee before the effective period ends. Minn. Stat. § 80C.08, subd. 1. The Legislature set this 12-month-from-order framing and the $200 fee in 2022 Minn. Laws ch. 91, § 1, so track the current rule rather than any older fixed-expiration language. If you miss the annual report and fee, that is cause for cancellation of the registration, though a cancelled registration can be reinstated later by filing the report and paying the fee. Minn. Stat. § 80C.08, subd. 2.

Exemptions From Registration

Minnesota law lists eight exemption categories, paragraphs (a) through (h), and each is available only if the method of offer or sale is not used to evade the Act. Minn. Stat. § 80C.03. Two come up most often. An existing franchisee may resell its own franchise, but no more than one sale in any 12 consecutive months. Minn. Stat. § 80C.03(a). A new franchisor may rely on the isolated-sale exemption, but only if all of these conditions are met: no more than one sale in any 12 months, no advertising of the franchise to the general public, escrow of all franchisee fees within two days of receipt, and written notice to the commissioner at least 10 business days before the sale. Minn. Stat. § 80C.03(e). The commissioner may also grant a discretionary exemption by rule or order. Minn. Stat. § 80C.03(g). An exemption is never automatic.

The Public Offering Statement

You apply to register a franchise by filing a proposed public offering statement with the commissioner, accompanied by a $400 fee. Minn. Stat. § 80C.04, subd. 1. The statement must contain certain information that outlines the relationship and transaction between the franchisor and the franchisee. Among other items, it must disclose the franchisor’s name and business form, the franchise fee and the franchisor’s proposed use of the proceeds, a copy of the entire franchise agreement, the training and assistance the franchisor provides, and the conditions for termination, non-renewal, and repurchase, along with any limits on your right to sell, transfer, assign, renew, or terminate the franchise. Minn. Stat. § 80C.04, subd. 1.

Protections for Franchisees

The Act builds in protections, primarily for the franchisee. In most franchise relationships the franchisor is a larger, established chain with more resources and stronger bargaining power, and that imbalance can invite abuse. The Act responds with three distinct protections, each carrying its own standard. Do not assume one uniform 90-day, good-cause rule governs all three.

Termination or cancellation. A franchisor may not terminate or cancel a franchise except for good cause. Minn. Stat. § 80C.14, subd. 3(b). It also generally must give written notice stating all the reasons at least 90 days in advance, with a 60-day period for you to cure the stated reasons, and notice takes effect immediately only where the grounds are voluntary abandonment, conviction of an offense directly related to the franchise business, or failure to cure a goodwill-impairing default after at least 24 hours’ written cure notice. Minn. Stat. § 80C.14, subd. 3(a). Good cause means your failure to substantially comply with the material and reasonable franchise requirements the franchisor imposes, including bankruptcy or insolvency, assignment for the benefit of creditors, voluntary abandonment, conviction of a franchise-related offense, or conduct that materially impairs the franchisor’s goodwill. Minn. Stat. § 80C.14, subd. 3(b).

Failure to renew. A franchisor may not fail to renew unless the non-renewal is for good cause, or the franchisor gives at least 180 days’ advance written notice and lets you operate long enough to recover the fair market value of the franchise as a going concern. Minn. Stat. § 80C.14, subd. 4. The notice period for non-renewal is 180 days, not 90. A franchisor also may not refuse to renew for the purpose of converting your business premises to an operation it will own for its own account, which blocks a franchisor from declining renewal to take over a profitable location.

Transfer. A franchisor may not unreasonably withhold consent to an assignment, transfer, or sale of the franchise when the proposed substitute franchisee meets the franchisor’s present qualifications and standards. Minn. Stat. § 80C.14, subd. 5. This is a reasonableness standard, not good cause, and it carries no advance-notice period.

Civil Liability

The Act’s money remedy comes from a dedicated liability section. A person who violates any provision of the chapter “shall be liable to the franchisee or subfranchisor who may sue for damages caused thereby, for rescission, or other relief as the court may deem appropriate.” Minn. Stat. § 80C.17, subd. 1. Because that provision reaches any violation of the chapter, it supplies the damages remedy for the unfair-practices prohibition as well. A successful suit recovers the actual damages you sustain together with costs, disbursements, and reasonable attorney’s fees. Minn. Stat. § 80C.17, subd. 3. Watch the deadline: no action may be commenced more than three years after the cause of action accrues. Minn. Stat. § 80C.17, subd. 5.

The Federal FTC Franchise Rule

Minnesota registration sits alongside a federal layer. The Federal Trade Commission’s Franchise Rule, 16 C.F.R. Part 436, is the operative federal disclosure regulation, and its core definition of a franchise is unchanged. The Rule’s dollar-based exemption thresholds, however, are re-set for inflation every fourth year based on the Consumer Price Index, so figures copied from older FTC guidance cannot be assumed current. 16 C.F.R. § 436.8. As amended effective July 12, 2024, the current thresholds are a minimal-payment exemption for required payments of less than $735, a large-investment exemption at an initial investment of at least $1,469,600, and a large-franchisee exemption for an entity in business at least five years with a net worth of at least $7,348,000. 16 C.F.R. § 436.8. One exemption carries no dollar figure and does not move with inflation: the insider exemption for a purchaser of at least a 50 percent interest who has been, for at least two years, an officer, director, or manager of the franchisor, or an owner of at least 25 percent of the franchisor. 16 C.F.R. § 436.8(a)(6).

Where to Find the Law

The full Minnesota Franchise Act is at Minn. Stat. §§ 80C.01–.22. The Minnesota Department of Commerce provides registration information, forms, required steps, and fees at mn.gov/commerce. The Department’s Franchise Rules are set out in the Minnesota Rules at Minn. R. ch. 2860. The details reward careful reading before you register a franchise, sign a franchise agreement, or act on a termination or non-renewal notice.