What to Know About Fractional Franchises in Connecticut

 Posted on August 26, 2025 in Business Law

Fractional franchising is becoming increasingly common in Connecticut and across the United States. A fractional franchise is a type of franchise arrangement where an existing business or person operates a franchise for a small portion of their total business. Fractional franchises tend to be part-time endeavors, or an add-on to an existing operation rather than a primary source of income.

The business model of a fractional franchise allows the franchisee to add products or services from a franchisor to their established business. One of the things that makes fractional franchises so attractive is that they are often exempt from federal and state franchise registration requirements.

This is because the franchise sales are not expected to exceed 20 percent of the total sales, and the franchisee has prior experience in a similar business (2+ years of experience in Connecticut).  If you are considering a fractional franchise, it can be extremely beneficial to speak to a Greenwich, CT business law attorney with experience in franchising.

What Laws Govern Connecticut Fractional Franchises?

The FTC definition of fractional franchising, including the less than 20 percent income and two-year experience criteria, is found in section 436.8(a)(2). Connecticut statutes (Section 42-133f) have more information regarding franchises, particularly regarding termination. In a fractional franchise, a Connecticut business adds a well-known brand as a counter, service line, or kiosk to the existing business. Fractional franchises, as opposed to regular franchises, can change what disclosures are required before the deal closes.

What You Need to Know About Fractional Franchises

The franchisee must already have an established business and relevant experience, and the franchise operation must complement the existing business, adding to it rather than replacing any part of the existing business. As noted, sales from the franchise should not be expected to make up more than 20 percent of the franchisee’s total sales volume. Adding a fractional franchise is generally more financially feasible than a traditional franchise. Some examples of fractional franchises include:

• A coffee shop within an existing business, such as a hotel, bookstore, or larger retail store.
• A recognized fast-food kiosk in a convenience store that operates a limited menu.
• A health screening franchise within a healthcare provider’s office.
• Regional real estate brokers affiliating with a national commercial real estate company.
• A franchise that provides specialized technology integration services incorporated into an existing business.

The Process of Structuring a Fractional Franchise in Connecticut

The person wanting to open a fractional franchise must confirm his or her two-plus years of experience as an operator/manager and provide a written basis for the less than 20 percent first-year sales expectation. Make sure the arrangement meets the definition of a Connecticut franchise, including a marketing plan, and have an attorney draft the necessary paperwork with CFA protections in mind, including good-cause termination, the three-year minimum term issue, and 60-day notice. Lease terms must align, and any necessary sublicenses or agreements must be in place.

In some cases, a trademark filing under the Business Opportunity Act may be necessary; however, in most cases, the trademark-based exclusion is relied upon by filing a simple notice with the Department of Banking. The revenue from the fractional franchise must not exceed 20 percent without full documentation explaining why the original expectation of less than 20 percent was reasonable at the time of the sale.

Contact a Greenwich, CT Franchise Lawyer

If you are considering a fractional franchise in Connecticut, a Greenwich, CT business law attorney from Ivey, Barnum & O'Mara, LLC can help you vet whether the proposed franchise qualifies for the FTC exemption, while structuring documents to comply with the Connecticut Franchise Act.

Our attorneys are actively involved in civic and charitable organizations, serving in various positions, including Probate Judge and in the U.S. Congress and Senate. We are experienced and knowledgeable and will ensure there are no glitches in your new fractional franchise. Call 203-661-6000 to schedule your free consultation.