Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: NASAA revises proposed franchise multi-unit commentary, seeks public comment, (Apr 15, 2014)
Organizations Mentioned:North American Securities Administrators Association
By John W. Arden, J.D., LL.M.
A proposed commentary on the disclosure of multi-unit franchising in franchise disclosure documents has been revised and re-released for public and internal comment, the North American Securities Administrators Association, Inc. (NASAA) announced today. The proposed Revised Multi-Unit Commentary addresses specific disclosure questions raised by franchise attorneys and state franchise examiners about multi-unit franchising.
NASAA’s Franchise and Business Opportunity Project Group released the proposed Original Multi-Unit Commentary on October 15, 2013 and requested public and internal comment. The commentary was intended to provide practical guidance for disclosing multi-unit franchising arrangements that have become common in franchising but that are not specifically addressed by NASAA’s 2008 Franchise Registration and Disclosure Guidelines or the FTC Franchise Rule.
The original commentary addressed specific disclosure questions brought to the attention of NASAA’s project group about the three multi-unit franchising structures (area development, subfranchising, and area representation). The body of the commentary was a group of questions and answers for each of these three structures, specifically dealing with items in a franchise disclosure document.
NASAA received six formal public comments and several informal comments between October 15 and November 15, 2013. A review of these comments prompted the Project Group to make revisions to the Multi-Unit Commentary. These revisions (1) change the definition of “area representative”; (2) clarify how franchisors must disclose area developers in the lists of current and former franchisees; (3) prescribe how subfranchisors must list current and former franchisees; and (4) explain the circumstances when franchisors must disclose business experience, litigation, and bankruptcy information of area representatives. The Project Group made additional revisions to the language and organization of specific items of the Commentary.
The Project Group did not change the requirement of 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 Franchise Disclosure Document—a change urged by several commenters. The Project Group also did not address additional questions and issues not discussed in the Original Commentary.
The comment period for the proposed Revised Commentary runs from April 15 through May 16, 2014. Comments should be directed by email or in hard copy to:
Dale E. Cantone
Chair, Franchise and Business Opportunity Project Group
Office of the Attorney General, Securities Division
200 St. Paul Place
Baltimore, Maryland 21202-2020
or
Rick Fleming
Deputy General Counsel
NASAA Legal Department
NASAA
750 First Street, Suite 1140
Washington, DC 20002
News: FranchisingDistribution