Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: NASAA franchising group issues new disclosure guidance on potential price fluctuations and supply chain disruptions, (Aug 15, 2025)

By Peter Reap, J.D., LL.M.

Compliance with the FTC Franchise Rule is never excused by changing market conditions, economic challenges, or volatility, says the group.

The compliance obligation for franchisors with the FTC Franchise Rule is absolute, and is never excused by changing market conditions, economic challenges, or volatility, says NASAA’s Franchise and Business Opportunities Project Group (FPG) in newly issued guidance. The FPG explained that it had been asked for guidance by the franchise industry as to how potential price fluctuations and supply chain disruptions may affect disclosures in Franchise Disclosure Documents (“FDDs”). The new guidance, Impact of Shifting Market and Economic Factors on Franchise Disclosures, was issued by the FPG on August 6, 2025, and was rapidly lauded by the International Franchise Association (IFA).

Details of the guidance. The guidance begins by recognizing that the franchisor-franchisee relationship and disclosures in FDDs can be impacted by market changes leading to price fluctuations and supply-chain disruptions. The FPL’s 2020 guidance issued during the tribulations caused by the COVID-19 pandemic, "Disclosing Financial Performance Representations in the Time of COVID-19," concluded that, for purposes of making a financial performance representation:

• franchisors cannot avoid the obligation to update a disclosure to reflect a material change by stating that the disclosure is “not representative of what prospective franchisees can expect [as a result of the unforeseen event],” that the franchisor “cannot predict how the franchise system will be affected,” or otherwise suggest that “prospective franchisees should not rely on the disclosure.”3 The COVID-19 Guidance also noted that, while franchisors may argue that well-meaning cautionary language like the examples above is purely factual and accurate, the language can only be viewed by a prospective franchisee “as a further admonition not to rely on the information presented.”“

The FPG states that the purpose of this new guidance is to address approaches that franchisors may consider in addressing uncertainty in their initial and amended FDD disclosures.

The guidance goes on to list several required FDD disclosures that might be affected by market and economic changes. These include Items: 5 (initial fees), 6 (other fees), 7 (estimated initial expenses), 11 (typical length of time between the earlier of the signing of the franchise agreement or the first payment to the franchisor, and the opening of the franchise outlet), and 19 (financial performance representations or FPRs).

Changes in market forces may require disclosures to be amended to avoid omissions of material fact or untrue statements, the guidance continues. Whether or not a franchisor can continue to use an FDD without amending disclosures because of such changes depends on various factors. The guidance than lists several of these, including the ranges provided in Items 5, 6, and 7; the reasonableness and accuracy of Item 7 and 11 disclosures; the continued reasonableness of any FPRs in item 19; and state laws.

Despite economic and market changes, “franchisors retain their obligation to provide complete and accurate disclosures, without disclaimers,” the guidance states. It advises:

• The guiding principle for a franchisor should be transparency and specificity in its disclosures.

• Any language suggesting that prospective franchisees cannot rely on a disclosure in the FDD is a prohibited disclaimer.

• Franchisors should not make general disclosures about evolving economic or market factors if they are not materially impacted by them

“Market and economic changes and uncertainties do not excuse compliance with the FTC Franchise Rule. Ultimately, prospective franchisees must be provided with disclosures that are accurate, clear, and not misleading,” the guidance concludes.

IFA reaction. The IFA praised the FPG’s new guidance by issuing this statement: “As trade negotiations increase costs for franchisors and franchisees alike, IFA is grateful the NASAA Franchise Project Group supported IFA’s request to recognize the challenges brands face as they navigate the unpredictable tariff environment, while striving to continue providing transparency to franchisees about the cost of doing business,” said Matt Haller, IFA President and CEO.

News: FranchisingDistribution