WASHINGTON, D.C. (June 17, 2020) – The Franchise and Business Opportunities Project Group of the North American Securities Administrators Association (NASAA) today issued guidance regarding franchisors using historical financial performance representations in 2020 considering the significant impact the COVID-19 pandemic has had on many franchise businesses.
The guidance includes factors franchisors should consider when determining current and future use of historical financial performance representations, while cautioning that franchisors cannot avoid obligations to update franchise disclosure documents by including disclaimer language suggesting that franchisees should not rely on disclosures that do not reflect the impact of COVID-19.
The guidance also notes that franchisors should be prepared to respond to comments from state franchise examiners asking for an explanation of how a franchise performance representation based on data compiled in 2019 complies with franchise law requirements. The guidance is available on the NASAA website (www.nasaa.org) under Industry Resources.
Separately, NASAA recently published its 366-page Franchise Disclosure Document Handbook: A Resource Guide for Preparing a Franchise Disclosure Document. The handbook is a compilation of the various rules, commentaries, and guidance from the Federal Trade Commission and NASAA governing the preparation of Franchise Disclosure Documents. These disclosure documents are presented to prospective buyers of franchises as part of the purchasing process.
In preparing any Franchise Disclosure Document, drafters should review all applicable laws, rules, regulations, and guidelines, and all available interpretive guides, including those in the handbook, which is available for purchase through Amazon for $24.99 (paperback) and $4.99 (Kindle e-book).
NASAA is the membership organization of state and provincial securities regulators in the United States, Canada, and Mexico. In the United States, 21 state securities agencies have been given statutory authority to regulate franchises and business opportunities by their legislatures. In some states, they are regulated by the attorney general’s office, office of consumer affairs, or other departments.