The NASAA’s [North American Securities Administrator Association] Franchise and Business Opportunity Project Group [Franchise Project Group] has released for internal and public comment a Proposed Franchise Commentary on Financial Performance Representations {FPR Commentary].
FPR are covered in Item 19 of the Franchise Disclosure Document [FDD]. And, the regulatory skinny is: You can only tell prospective franchisees about the future or historic franchise earnings, if they are included in the Item 19 of the FDD. If franchisors don’t include an Item 19, the franchisor cannot talk to franchisee about earnings.
That is the skinny, but there are lots and lots of rules, debates, and opinions about what can and should be in an Item 19 Financial Performance Representation. The FPR Commentary is crafted to answer some of the questions. It doesn’t replace or change the FTC Franchise Disclosure Rule and it does not cover everything. You still have to read and know the Rules.
However, with those disclaimers, here are the Dos and Don’ts from the FPR Commentary.
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Trademarking and Franchise Law