Following up on my blog post of October 23, 2013, NASAA’s Franchise and Business Opportunity Project Group has released for public comment proposed revisions to its Franchise Multi-Unit Commentary. As described in my past post, this commentary addresses the interpretation of franchise disclosure regulations for certain multi-unit franchising arrangements that have become common in franchising. The comment period is open until May 16, 2104.

Some of the revisions to the original proposal include changes to the definition of “area representative” and clarifications to how franchisors must disclose area developers, how subfranchisors much list franchisees and the circumstances when franchisors must disclose business experience, litigation and bankruptcy information of area representatives. The revisions did not change the requirement that a franchisor may not combine disclosures for an area representative offering with disclosure for a unit offering, which apparently is a change which was proposed by several commentators on the original proposal.

The effective date for these regulations will be 180 days after the date of adoption by NASAA, but be aware that if a franchisor already has an effective Franchise Disclosure Document on the date of adoption, that Franchise Disclosure Document must comply with the commentary 120 days after the franchisor’s or subfranchisor’s next fiscal year end.

Once again, I applaud the work of the Project Group. These clarifications are long overdue.

To obtain a copy of the proposed changes to the Franchise Multi-Unit Commentary and further information on submitting comments, visit www.nasaa.org and click on “Regulatory Activity” and “nasaa proposals”.