1995 - 1996 LEGISLATURE
February 28, 1996 - Introduced by Senators Darling, Huelsman and Fitzgerald,
cosponsored by Representatives Jensen, Green, Hoven, Ladwig, Hahn,
Springer, Grothman
and Seratti. Referred to Committee on Education and
Financial Institutions.
SB580,1,15 1An Act to repeal 553.03 (1) and (8m), 553.03 (10), 553.21 (2), 553.26 (intro.),
2553.26 (5) and (6), 553.26 (7), 553.26 (8) to (17), 553.26 (18), 553.26 (19), 553.26
3(20), 553.26 (21), 553.26 (22), 553.27 (1), 553.27 (2) and (3), 553.27 (5), 553.27
4(6), 553.27 (7), 553.27 (8), 553.27 (9), 553.27 (11), 553.28 (1) (f), 553.29, 553.30,
5553.31, 553.53, 553.58 (3), 553.72 (2), 553.74 (2) and 553.76 (2); to renumber
6and amend
553.21 (1), 553.74 (1) and 553.76 (1); to amend 553.23, 553.235
7(1) (intro.), 553.235 (2) (a), 553.24 (1), 553.24 (2), 553.24 (4) (intro.), 553.24 (6),
8553.25, 553.26 (title), 553.27 (title), 553.27 (4), 553.27 (10), 553.28 (title), 553.28
9(1) (intro.), 553.28 (1) (b), 553.28 (1) (d), 553.28 (1) (e), 553.28 (2), 553.41 (1),
10553.41 (3), 553.41 (4), 553.41 (5), 553.51 (title), 553.51 (1), 553.51 (2), 553.51 (4),
11553.52 (1), 553.52 (2), 553.56 (1), 553.58 (1), 553.59, 553.60, 553.605 (1) (a)
12(intro.), 553.72 (1) and 553.75 (3); to repeal and recreate 553.22, 553.26 (1)
13to (3) and 553.26 (4); and to create 553.03 (8g) and 553.26 (4m) of the statutes;
14relating to: the regulation of sales of franchises and granting rule-making
15authority.
Analysis by the Legislative Reference Bureau
This bill makes many changes to the franchise investment law. The major
change is to replace the current registration system with a requirement that a notice

of registration of the franchise be filed. Other changes include discontinuing the
requirement that advertisements of the franchise be filed with the division of
securities and creating a statute of limitation of one year after discovery of a
violation.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB580, s. 1 1Section 1. 553.03 (1) and (8m) of the statutes are repealed.
SB580, s. 2 2Section 2. 553.03 (8g) of the statutes is created to read:
SB580,2,33 553.03 (8g) "Notification" means notification under s. 553.26.
SB580, s. 3 4Section 3. 553.03 (10) of the statutes is repealed.
SB580, s. 4 5Section 4. 553.21 (1) of the statutes is renumbered 553.21 and amended to
6read:
SB580,2,9 7553.21 Registration requirement. No person may sell or offer in this state
8any franchise unless the offer of the franchise has been registered under this chapter
9or is exempted under s. 553.22, 553.23, 553.235 or 553.25.
SB580, s. 5 10Section 5. 553.21 (2) of the statutes is repealed.
SB580, s. 6 11Section 6. 553.22 of the statutes, as affected by 1995 Wisconsin Act 27, is
12repealed and recreated to read:
SB580,2,14 13553.22 Excluded franchises. This chapter does not apply to the offer or sale
14of the following franchises:
SB580,3,3 15(1) Any relationship if the person described in the offer as a franchisee, or any
16of the current directors or executive officers of that person, has been in the type of
17business of the franchise relationship for more than 2 years and the parties
18anticipated, or should have anticipated, at the time the agreement establishing the
19franchise relationship was reached, that the sales arising from the relationship

1would account for no more than 20% of the gross sales revenue of the franchisee for
2a period of at least one year after the franchisee begins selling the goods or services
3involved in the franchise.
SB580,3,5 4(2) An association of producers of agricultural products authorized by 7 USC
5291
(1).
SB580,3,8 6(3) An organization that is operated on a cooperative basis by and for
7independent retailers and that sells goods at wholesale to, or furnishes services
8primarily to, its members.
SB580, s. 7 9Section 7. 553.23 of the statutes is amended to read:
SB580,3,17 10553.23 Private franchisee and subfranchisor sales exempted. The offer
11or
sale of a franchise by a franchisee for the franchisee's own account or and the offer
12or
sale of the entire area franchise owned by a subfranchisor for the subfranchisor's
13own account is are exempted from s. 553.21 if the sale is not effected by or through
14a franchisor. A sale is not effected by or through a franchisor merely because a
15franchisor has a right to approve or disapprove a different franchisee or because a
16franchisor imposes or has the right to impose a fee or charge to reimburse the
17franchisor for reasonable and actual expenses incurred in connection with the sale.
SB580, s. 8 18Section 8. 553.235 (1) (intro.) of the statutes is amended to read:
SB580,3,2119 553.235 (1)Conditions of exemption. (intro.) Except as provided in sub. (2),
20a registration exemption is available for the offer or sale of a franchise that meets all
21of the following conditions:
SB580, s. 9 22Section 9. 553.235 (2) (a) of the statutes is amended to read:
SB580,3,2523 553.235 (2) (a) The exemption under sub. (1) is not available for the offer or sale
24of a franchise in which the franchisee would be a motor vehicle dealer or a motor
25vehicle distributor or wholesaler, as defined in s. 218.01 (1).
SB580, s. 10
1Section 10. 553.24 (1) of the statutes, as affected by 1995 Wisconsin Act 27,
2is amended to read:
SB580,4,53 553.24 (1) The division may by order deny or revoke any exemption under s.
4553.22, 553.23, 553.235 or 553.25 with respect to the offer or sale of a franchise for
5any of the grounds specified in s. 553.28 (1).
SB580, s. 11 6Section 11. 553.24 (2) of the statutes, as affected by 1995 Wisconsin Act 27,
7is amended to read:
SB580,4,108 553.24 (2) If the public interest and the protection of investors so require, the
9division may, by order, summarily deny or revoke any exemption under s. 553.22,
10553.23, 553.235 or 553.25 with respect to the offer or sale of a franchise.
SB580, s. 12 11Section 12. 553.24 (4) (intro.) of the statutes, as affected by 1995 Wisconsin
12Act 27
, is amended to read:
SB580,4,1513 553.24 (4) (intro.) A person who offers or sells a franchise pursuant to an
14exemption under s. 553.22, 553.23, 553.235 or 553.25 after the exemption is denied
15or revoked by an order of the division does not violate s. 553.21 if:
SB580, s. 13 16Section 13. 553.24 (6) of the statutes, as affected by 1995 Wisconsin Act 27,
17is amended to read:
SB580,4,2418 553.24 (6) Within 10 days after the filing date of the information required
19under s. 553.22 or
an application for an exemption under s. 553.25, the division may
20require that additional information be filed if the division determines that the
21information is reasonably necessary to establish an exemption under s. 553.22 or
22553.25. If the division requires additional information, the exemption is not effective
23until 10 days after the additional information is filed with the division, unless a
24shorter period is permitted by the division.
SB580, s. 14
1Section 14. 553.25 of the statutes, as affected by 1995 Wisconsin Act 27, is
2amended to read:
SB580,5,5 3553.25 Exemption by division. The division may by rule or order exempt
4from registration under s. 553.21 any offer or sale of a franchise if registration is not
5necessary or appropriate in the public interest or for the protection of investors.
SB580, s. 15 6Section 15. 553.26 (title) of the statutes is amended to read:
SB580,5,7 7553.26 (title) Application for registration Registration by notification.
SB580, s. 16 8Section 16. 553.26 (intro.) of the statutes is repealed.
SB580, s. 17 9Section 17. 553.26 (1) to (3) of the statutes are repealed and recreated to read:
SB580,5,1910 553.26 (1) A person who wishes to sell a franchise in this state that is not
11excluded under s. 553.22 and that is not exempt from registration under s. 553.23,
12553.235 or 553.25 shall register the franchise by notification to the division. The
13notification shall be on a form prescribed by the division, which need include only the
14name of the franchisor or subfranchisor, the name or names under which the
15franchisor or subfranchisor intends to do business and the franchisor's or
16subfranchisor's principal business address. Nothing other than a copy of the offering
17circular required under s. 553.27(4), the consent to service of process required by s.
18553.27 (10), if it is not already on file with the division, and the registration fee
19required under s. 553.72 (1) need accompany the notification.
SB580,5,20 20(2) A franchisor may register only one franchise system on each notification.
SB580,5,22 21(3) Registration is effective upon receipt of the notification by the division. The
22notice shall be effective for one year from the date on which the division receives it.
SB580, s. 18 23Section 18. 553.26 (4) of the statutes, as affected by 1995 Wisconsin Act 27,
24is repealed and recreated to read:
SB580,6,3
1553.26 (4) Upon receipt of notification, the division shall endorse upon the
2notice "received" and the date and shall return a copy to the person who filed the
3notice.
SB580, s. 19 4Section 19. 553.26 (4m) of the statutes is created to read:
SB580,6,85 553.26 (4m) A person who has complied with sub. (1) need not file with the
6division, during the period when the registration is effective, any more information,
7including any amendments to the offering circular. The division may not review the
8offering circular for the adequacy of its disclosure.
SB580, s. 20 9Section 20. 553.26 (5) and (6) of the statutes are repealed.
SB580, s. 21 10Section 21. 553.26 (7) of the statutes, as affected by 1995 Wisconsin Act 27,
11is repealed.
SB580, s. 22 12Section 22. 553.26 (8) to (17) of the statutes are repealed.
SB580, s. 23 13Section 23. 553.26 (18) of the statutes, as affected by 1995 Wisconsin Act 27,
14is repealed.
SB580, s. 24 15Section 24. 553.26 (19) of the statutes is repealed.
SB580, s. 25 16Section 25. 553.26 (20) of the statutes, as affected by 1995 Wisconsin Act 27,
17is repealed.
SB580, s. 26 18Section 26. 553.26 (21) of the statutes is repealed.
SB580, s. 27 19Section 27. 553.26 (22) of the statutes is repealed.
SB580, s. 28 20Section 28. 553.27 (title) of the statutes is amended to read:
SB580,6,22 21553.27 (title) General registration provisions; offering circular;
22consent to service of process
.
SB580, s. 29 23Section 29. 553.27 (1) of the statutes is repealed.
SB580, s. 30 24Section 30. 553.27 (2) and (3) of the statutes, as affected by 1995 Wisconsin
25Act 27
, are repealed.
SB580, s. 31
1Section 31. 553.27 (4) of the statutes, as affected by 1995 Wisconsin Act 27,
2is amended to read:
SB580,7,103 553.27 (4) No franchise subject to registration under this chapter may be sold
4in this state unless a copy of the an offering circular in the form prescribed by rule
5of the division
is provided to the prospective franchisee at least 10 business days
6prior to the execution by the prospective franchisee of any binding franchise or other
7agreement or at least 10 business days prior to the receipt of any consideration,
8whichever first occurs. The offering circular may be in a form that the division
9requires by rule, in a form permitted under 16 CFR 436 or in a form permitted by a
10successor to that regulation.
SB580, s. 32 11Section 32. 553.27 (5) of the statutes is repealed.
SB580, s. 33 12Section 33. 553.27 (6) of the statutes, as affected by 1995 Wisconsin Act 27,
13is repealed.
SB580, s. 34 14Section 34. 553.27 (7) of the statutes, as affected by 1995 Wisconsin Act 27,
15is repealed.
SB580, s. 35 16Section 35. 553.27 (8) of the statutes, as affected by 1995 Wisconsin Act 27,
17is repealed.
SB580, s. 36 18Section 36. 553.27 (9) of the statutes, as affected by 1995 Wisconsin Act 27,
19is repealed.
SB580, s. 37 20Section 37. 553.27 (10) of the statutes, as affected by 1995 Wisconsin Act 27,
21is amended to read:
SB580,8,1222 553.27 (10) Every applicant for registration of an offer to sell franchises under
23this chapter
franchisor who files a notification shall file with the division, in such the
24form as that the division by rule prescribes, an irrevocable consent appointing the
25division to be the applicant's attorney to receive service of any lawful process in any

1civil action against the applicant or the applicant's successor, executor or
2administrator, which that arises under this chapter or any rule or order under this
3chapter after the consent has been filed, with the same force and validity as if served
4personally on the person filing the consent. A person who has filed a consent in
5connection with a previous registration or exemption under this chapter need not file
6another. Service may be made by leaving a copy of the process in the office of the
7division but it is not effective unless the plaintiff, who may be the division in an action
8instituted by the division, forthwith sends notice of the service and a copy of the
9process by registered or certified mail to the defendant or respondent at his or her
10last address on file with the division, and the plaintiff's affidavit of compliance with
11this subsection is filed in the case on or before the return day of the process, if any,
12or within such further the time as that the court allows.
SB580, s. 38 13Section 38. 553.27 (11) of the statutes, as affected by 1995 Wisconsin Act 27,
14is repealed.
SB580, s. 39 15Section 39. 553.28 (title) of the statutes is amended to read:
SB580,8,17 16553.28 (title) Denial, suspension or revocation of registrations or
17exemptions
.
SB580, s. 40 18Section 40. 553.28 (1) (intro.) of the statutes, as affected by 1995 Wisconsin
19Act 27
, is amended to read:
SB580,8,2220 553.28 (1) (intro.) The division may issue an order denying effectiveness to, or
21postponing,
suspending or revoking the effectiveness of, any registration statement
22if the division finds any of the following:
SB580, s. 41 23Section 41. 553.28 (1) (b) of the statutes is amended to read:
SB580,9,3
1553.28 (1) (b) That the offer, purchase or sale of the franchise would constitute
2misrepresentation to, or deceit or fraud upon, purchasers thereof, or of the franchise,
3has worked or tended to work a fraud upon purchasers or would so operate.
SB580, s. 42 4Section 42. 553.28 (1) (d) of the statutes is amended to read:
SB580,9,115 553.28 (1) (d) That any person identified in an application for registration the
6franchisor's offering circular
has been convicted of an offense specified under s.
7553.26 (5)
that is required to be disclosed in the offering circular, or is subject to an
8order, or has had a civil judgment entered against him or her as described in s. 553.26
9(5)
that is required to be disclosed in the offering circular, and the involvement of the
10person in the same sale or management of the franchise creates an unreasonable risk
11to prospective franchisees.
SB580, s. 43 12Section 43. 553.28 (1) (e) of the statutes, as affected by 1995 Wisconsin Act 27,
13is amended to read:
SB580,9,1614 553.28 (1) (e) That the applicant or registrant franchisor has failed to pay the
15proper filing fee;, but the division may enter only a denial order under this paragraph
16and the division
shall vacate any such order when the deficiency has been corrected.
SB580, s. 44 17Section 44. 553.28 (1) (f) of the statutes is repealed.
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