Many franchisors elect to include disclaimers in their Franchise
Disclosure Documents (FDD) and Franchise Agreements relating to
certain representations that may have been made (or not made)
during the franchise sales process. These disclaimers are typically
in the form of a questionnaire that consist of a series of
questions asking a prospective franchisee to check "yes"
or "no" to questions relating to the franchise sales
process. For example, the "prospective franchisee has read and
understands the FDD and all attachments to the FDD, including the
Franchise Agreement"; "Franchisor has not made any
representation, including financial performance representation,
outside of or different from the FDD and its attachments"; and
similar questions. On September 20, 2022, the North American
Securities Administrators Association, Inc. (NASAA) released a
Statement of Policy Regarding the Use of Franchise Questionnaires
and Acknowledgments.
Effective, January 1, 2023, NASAA's Statement of Policy
provides for certain policies regarding the use of these
questionnaires in FDDs and Franchise Agreements. First, if a
franchisor chooses to ask prospective franchisees to sign a
questionnaire at the end of the sales process, that questionnaire
needs to be referenced in Item 22 of the FDD and attached as an
exhibit to the FDD. Moreover, if the franchisor asks a prospective
franchisee to verbally respond to a questionnaire on video, a
written script must be referenced in Item 22 and attached to the
FDD as an exhibit.
Second, the policy prohibits the use of any statements or questions
that would cause a prospective franchisee to surrender (or believe
they have surrendered) any rights under federal or state law or
that would shift a franchisor's disclosure duties under
appliable law. The policy also includes a list of prohibited
statements or questions to be included in the questionnaire.
Third, the franchisor must include in its FDD and franchise
agreement a specific statement that the questionnaire or any other
statement or acknowledgment signed or agreed to by the prospective
franchisee shall not have the effect of waiving any claims under
applicable state franchise laws or disclaiming any reliance on any
statement made by the franchisor, franchise seller, or other person
acting on behalf of the franchisor.
The full Statement of Policy can be found
here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
