One of the foremost questions prospective franchisees ask is ‘How much will I make?’ Unless you include an item 19, Financial Performance Representation [FPR], you must say ‘I am not at liberty to tell you that’ or you can say: ‘Don’t ask me. Ask them.’ Them referring to existing franchisees. Either way is not a good answer. More and more franchisors are including an FPR in the franchise disclosure document [FPR] enabling them to ask this question and to further sales conversations with prospective franchisees.
As discussed on our Blawg previously, the NASAA [North American Securities Admiration Association] has come forth with guidance regarding an FPR. While the guidance is not set to be effective until next year, state examiners and drafters of the NASAA guidelines take the position that the guidance embodied is the Rule and should be adhered to now!
At the ABA Franchise Legal Symposium back in November, Dale Cantone from the Maryland Attorney General’s Office and lawyers from Witmer, Karp, Warner & Ryan LLP and Gray Plant Mooty presented some wonderful feedback and takeaways from the NASAA guidance.
Here is list of the common mistakes taken from the ABA Legal Symposium materials: