Tag Archives: North American Securities Administrators Association (NASAA)

What’s an FPR?

Every franchise buyer wants to know how much money he or she can make from the franchised business.  Franchise sellers naturally want to answer that question in order to make the sale.  But many say that they cannot give figures to prospective franchisees, and they suggest that the prospects talk to other franchisees whose contact information is typically listed in an exhibit to the franchise disclosure document (FDD). The fact is that franchise sellers may indeed provide information regarding earnings, but only if the franchisor discloses “financial performance representations” (or FPRs) in Item 19 of the FDD.  If no FPRs appear …

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Why Subfranchising is Rare in the U.S.

Subfranchising is one of three multi-unit franchise structures that the North American Securities Administrators Association, Inc. (NASAA) addressed in their Multi-Unit Commentary, which was the subject of an earlier post.  The other two types of multi-unit franchise offerings discussed in that post are area development and area representative. Of the three multi-unit approaches, the subfranchise is by far the least commonly used in the U.S.  And with good reason. In subfranchising, the franchisor appoints a master franchisee who has the right and obligation to sell subfranchises within a defined territory.  The agreement between the franchisor and the master franchisee is called …

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How to Disclose Multi-Unit Franchise Offerings

Multi-unit franchising is a good way to grow a franchise system quickly.  We now have guidance on how franchisors should present multi-unit franchise offerings. The North American Securities Administrators Association, Inc. (NASAA) adopted a Multi-Unit Commentary September 16, 2014.  Its message was this:  Starting in early 2015, registration states will not accept a combined franchise disclosure document (FDD) that includes both the single unit offering and the area representative offering.  The area representative offering must be disclosed in a separate document from the unit offering, and the two must be registered separately.  States that require franchise registration will no longer accept …

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