NASAA’s Franchise and Business Opportunity Project Group (the “Franchise Project Group” or “Project Group”) is rereleasing for public comment proposed revisions to NASAA’s proposed Multi-Unit Commentary.

The public comment period is from April 15 to May 16, 2014.  Accordingly, all comments should be submitted on or before May 16, 2014 by email or in writing and addressed to:

Dale Cantone, Chair

Office of the Attorney General
Division of Securities
200 St. Paul Place, 20th Floor
Baltimore, MD 21202-2020

Christopher Staley, Counsel
750 First Street, NE, Suite 1140
Washington, DC  20002

Download: Revised Multi-Unit Commentary (“Revised Commentary”)

Background and Summary

On October 15, 2013, NASAA authorized the release of a proposed Franchise Multi-Unit Commentary (the “Original Commentary”) for internal and public comment.  In response, NASAA received six (6) formal public comments and several additional informal comments. After reviewing all comments, the Project Group agreed that some revisions to the Multi-Unit Commentary were necessary or desirable.

In this Revised Commentary, the Project Group has changed the definition of “area representative.” The Project Group also has clarified how franchisors must disclose area developers in lists of current and former franchisees; how subfranchisors must list current and former franchisees; and the circumstances when franchisors must disclose business experience, litigation, and bankruptcy information of area representatives.  The Project Group also made additional revisions to the language and organization of specific items of the Commentary.

The Project Group did not change the requirement in the Original Commentary that a franchisor may not combine disclosures for an area representative offering with disclosures for a unit franchise offering in the same FDD, which was a change urged by several commenters.  The Project Group also did not address in the Revised Commentary additional questions and issues not discussed in the Original Commentary.