WASHINGTON, D.C. (Aug. 9, 2017) – In May 2017, the North American Securities Administrators Association (NASAA) approved its “Commentary on Financial Performance Representations” regarding Financial Performance Recommendations (FPRs) made by franchisors under Item 19 of the Franchise Disclosure Document (FDD). The NASAA commentary provides state regulators with guidance on what is required by both federal and state law if a franchisor chooses to discuss sales and/or profits in its FDD.
Specifically, the NASAA commentary adds seven new sections to Item 19 of the FDD to help guide regulators and protect investors from false or misleading FPRs. These new requirements apply to statements in regard to gross sales, gross profits and net profits. The guidance encompasses both company-owned data and franchisee data and includes the use of disclaimers and projections, among other FPRs.
The Coalition of Franchisee Associations (CFA) applauds NASAA for its commentary and believes this guidance will assist new and renewing business owners in making a sound financial decision. CFA urges the franchisor community to support NASAA’s guidance, as it helps alleviate concerns over earnings claims and misleading sales techniques.
“Franchising is a substantial part of the U.S. economy and, as such, presents numerous investment opportunities. It is important that people can feel informed when investing as franchisees and that franchisors offering investment opportunities have clear rules that they can easily follow. This is why CFA actively followed the rule-making process,” said CFA Vice Chairman Rob Branca. “This is a big step as CFA continues to fight for more comprehensive disclosure and transparency in franchising.”
To view CFA’s July 26 webinar on the new NASAA commentary, click here.