On May 19, 2019, the NASAA [North American Securities Administrators Association] Membership issued instructions for the new Franchise Disclosure Document [FDD] state cover page. The state cover sheet is expanding. It is now 3 pages, not just one. The pages include:
- How to Use This Franchise Disclosure Document
- What You Need to Know About Franchising Generally
- Special Risk(s) to Consider About This Franchise
The first page, How to Use This Franchise Disclosure Document, is a table with 8 questions in the first column and in the second column, a cross-reference in the franchise disclosure document. A narrative above tables states the mission of the table. The narrative reads:
Here are some questions you may be asking about buying a franchise and tips on how to find more information:
The question includes:
- How much can I earn?
- How much will I need to invest?
- Does the franchisor have the financial ability to provide support to my business?
- Is the franchise system stable, growing, or shrinking?
- Will my business be the only [XYZ] business in my area?
- Does the franchisor have a troubled legal history?
- What’s it like to be [an XYZ] franchisee?
- What else should I know?
The next page, What You Need to Know About Franchising Generally, is 7 general statements about franchising on the topics including:
- Continuing responsibility to pay fees.
- Business model can change.
- Supplier restrictions.
- Operating restrictions.
- Competition from franchisor.
- Renewal.
- When your franchise ends
The final page, special risk factors page, is kin to the risk factors required by the prior version of the state cover sheet.
Franchisors must comply with the new state cover page requirements by January 1, 2020.