IFA files comments with the North American Securities Administrators Association (NASAA) in response to their Proposed Statement of Policy Regarding the Use of Franchise Questionnaires & Acknowledgments
Today, most franchise brands use “Acknowledgements & Questionnaires” in their offerings and sales process to help ensure that prospective franchise owners understand FDD items. In the past few weeks, IFA has been involved in a very quiet process opposing an effort to potentially restrict how brands can use these provisions moving forward.
Last week, IFA filed comments with the North American Securities Administrators Association (NASAA) in response to their Proposed Statement of Policy Regarding the Use of Franchise Questionnaires & Acknowledgments. In short, the proposal will ban the use of questionnaires and acknowledgements in franchise offerings in states where NASAA regulators evaluate franchise registrations. However, with most brands desire to not have different FDDs for different states, NASAA statements of policy have the potential to become the de facto rule for all states. Based on feedback from IFA brands, outside franchise attorneys, and others we endeavored to craft comments taking a ‘soft opposition’ approach. Given our desire to work more closely with regulators and support them going after bad actors and increasing disclosure to improve outcomes in franchising (as we have discussed at recent IFA board meetings), while still opposing bad policy or government overreach, we attempted to strike a balance in messaging highlighting areas we agree with and are supportive of. We view the appropriate use of acknowledgements and questionnaires as a useful tool in the franchise sales process, especially to ensure franchisors and franchisees are on the same page and any inappropriate sales are stopped before moving forward. We do however agree with NASAA that questionnaires and acknowledgements should not be a broad liability shield. Ideally, NASAA will soften their policy approach and continue to allow the use of questionnaires and acknowledgements in appropriate fashions.
Realizing most franchise brands currently use Acknowledgements & Questionnaires in their offerings and sales process, we will continue to maintain a dialogue with NASAA and the broader regulatory community as this proposal moves through the process.