The Franchise Memorandum

On June 12, 2018, the Franchise Project Group of the North American Securities Administrators Association, Inc. (NASAA) sought public comments on a proposal (the “Proposal”) to revise instructions in its 2008 Franchise Registration and Disclosure Guidelines (“NASAA Guidelines”) regarding the information provided in the state cover sheets to franchise disclosure documents (FDDs). If the Proposal is adopted as currently written, three new state cover sheets titled “How to Use this Franchise Disclosure Document,” “What You Need to Know About Franchising, Generally,” and “Special Risk(s) to Consider about This Franchise” will replace the current state FDD cover sheet. As part of the Proposal, NASAA seeks to make the FDD a more user‐friendly tool for prospective franchisees by, among thing things, (i) providing prospective franchisees clearer directions about how to use the FDD, (ii) highlighting general information about franchising that prospective franchisees may not understand until after the franchisee has entered into the franchise relationship, and (iii) changing the format of the information presented in the state cover sheets, including requiring that all state‐required risk factors be written in lower case text instead of all capital letters, and providing new instructions and procedures for the inclusion of state‐required, nonuniform risk factors.

Gray Plant Mooty submitted comments to the Proposal to help improve the utility of the state cover sheets. Our comment letter is linked here. The comment period ended on July 13, 2018. We anticipate that NASAA will review the public comments over the next few months and will issue the revised NASAA Guidelines shortly thereafter. The Proposal, including instructions and a sample of the proposed “State Cover Sheets” and “State Effective Dates Page,” can be found at http://www.nasaa.org/regulatory‐activity/nasaa‐proposals/.