House Commerce panel presses Secretary of State office on franchise registration data gaps

The Vermont House Committee on Commerce & Economic Development questioned the Secretary of State's office on Feb. 6 about whether franchisors and franchisees doing business in Vermont must register and how the state can reliably identify them.

David Ault, director of the Business Services Division in the Secretary of State's office, told the committee that while entities that "do business" in Vermont generally must file as foreign entities and obtain a certificate of authority, the statute itself leaves room for interpretation. "The statute doesn't say what it means to be doing business in a jurisdiction," Ault said, noting 11 V.S.A. §4113 lists activities that "without more do not constitute transacting business," which requires a fact-specific analysis.

Why it matters: Committee members said they cannot craft sensible franchise regulation without a clearer picture of who is operating under franchise arrangements in Vermont. The data currently captured in formation and annual reports is limited; Ault estimated those filings would capture roughly 95% of for‑profit entities but warned that assumed names, certain partnerships or cooperatives and other entity types can create gaps.

Committee members discussed practical fixes. Ault said technology can capture additional fields but emphasized tradeoffs of time, resources and statutory authority. "If that's something that becomes part of our charge, can we build it? I'm sure we could," he said, describing options including a simple checkbox at initial filing or in periodic reporting and a freestanding data module for deeper tracking.

Ault also reminded the committee that enforcement exists for unregistered foreign entities, including penalties and the potential loss of access to courts if a business operates in Vermont without proper registration. Committee members asked the Secretary of State's staff to work with legislative staff (named staff and counsel) to draft feasible reporting options and to return with recommended language and technical requirements.

Next steps: The committee asked Secretary of State staff to coordinate with the committee's staff (Rick/Chris) to explore a targeted reporting requirement and possible checkbox at formation or annual reporting. No formal motion or vote was taken; staff follow-up was requested.