Multi-Territory Franchises: 3 More FAQ and Answers

iStock_000016268292Small FAQ
On April 15th, NASAA issued some revisions to recently published commentary. The revised commentary issued April 15th, clarified some of text in the initial commentary and provided more answers to questions about Area Representatives and franchise disclosures. Take a look at the questions and answers regarding Area Representatives.
 
1. As part of the Item 1 of the unit franchise disclosure document, must a franchisor disclose the availability of Area Representative franchises?
 
Answer: Yes, the availability of the Area Representative franchises must be disclosed in Item 1 of the unit franchise disclosure document. And, inversely the Area Representative franchise disclosure document should state the availability of unit franchises in Item 1.
 
2. Must Area Representatives be listed in Item 2 as having management responsibility?
 
Answer: Maybe. Area Representatives need only be listed in Item 2, if the Area Representative has management responsibilities for the sale or operations of the franchise system.
 
3. If an Area Representative is listed in Item 2 as having Management Responsibilities, do litigation and bankruptcy information about the Area Representative have be disclosed in Item 3 and Item 4?
 
Answer: Yes. If the Area Representative has management responsibilities, their individual litigation and bankruptcy histories must be listed in Item 3 and Item 4.
 
The revised NASAA commentary was released just 15 days before most franchisor’s franchise disclosure document were set to expire. No worries. Franchisors do not need to comply with the NASAA commentary until next year’s franchise disclosure update.
Want to learn more about the changes to the NASAA commentary? We have completed a comparison between the original and revised commentary. Email me at mbgettins@gettinslaw.com to get a copy of the comparison document.
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