While the Federal Trade Commission (“FTC”) has postponed enforcement of its amended “click-to-cancel” rule until July 14, 2025, franchisors that provide sample auto-renewing membership or subscription agreements to their franchisees should not wait to review and revise their templates. State auto-renewal and membership laws remain in full force and often impose more stringent or specific requirements. Below are key examples of state-level obligations that franchisees—and by extension, their franchisors—must continue to observe:

1. Disclosure – Some states require that auto-renewal terms be clearly and conspicuously disclosed in consumer agreements. This typically includes renewal terms, the cancellation policy, and timing. “Clearly and conspicuously” isn’t just a guideline—it’s often defined by statute with specific requirements for font size, formatting, and placement within the contract.
2. Notice of Renewal – For certain long-term agreements, businesses must provide written notice of renewal within a stipulated time before the end of the initial term.
3. Consumer Consent – Several states require businesses to obtain affirmative consumer consent before charging any payment method in connection with an auto-renewing contract, and some laws even specify how that consent must be obtained and recorded.
4. Cancellation Mechanism – For auto-renewing contracts, businesses must provide a toll-free telephone number, email address, postal address (if the seller directly bills the consumer), or another cost-effective, timely, and easy-to-use mechanism for cancellation. Some states further specify that consumers who accept an auto-renewing contract online must be allowed to terminate the automatic renewal contract online.
5. Surety Bond – Certain states impose bonding requirements on businesses offering membership-based services, particularly in sectors like health clubs, gyms, martial arts studios, and dance schools. These laws often require businesses to post a surety bond with the state as a condition of operating.

While franchisees are typically responsible for ensuring their customer-facing agreements comply with local laws, franchisors might consider the following to further protect the brand and the system as a whole:

1. Review and update sample agreements to reflect applicable state and federal requirements.
2. Remind franchisees to continuously monitor changes in the laws of their state.
3. Monitor legislative developments and enforcement trends to stay ahead of compliance obligations.

Although the FTC’s delay offers additional time for businesses to align with new federal requirements, franchisors cannot afford to be complacent. State-level auto-renewal and membership laws continue to apply—and they carry real enforcement risk. Proactive compliance can help to safeguard franchise systems from regulatory exposure and reputational harm.