Last week the NASAA Franchise and Business Opportunity Project Group released for public comment a Notice of Request for Comments Regarding A Proposed Franchise Commentary on Financial Performance Representations. The FPR Commentary includes proposed answers to frequently asked questions about how franchisors can make a Financial Performance Representation (“FPR” and sometimes also referred to as an earnings claim) in a Franchise Disclosure Document. FPR’s found in Item 19 of the FDD are one of the more difficult sections of an FDD to draft and often receive scrutiny from state regulators. The public comment period runs from October 1 through November 2, 2015. Once the comment period closes, NASAA will post comments received on its website.
Topics addressed include the use of disclaimers, the presentation of gross and net sales and profit figures, the presentation of data of company-owned versus franchised outlets, the use of subsets and projections, among others. On first read, it provides useful clarification addressing the standard of what constitutes a “reasonable basis” for making an FPR under federal and state franchise disclosure guidelines.
The Notice and Proposed FPR Commentary can be found here.