The North American Securities Administrators Association’s (“NASAA”) Statement of Policy Regarding the Use of Franchise Questionnaires and Acknowledgments (the “Policy”) became effective on January 1, 2023, and was the talk of the franchising community going into this last renewal season. The Policy aimed to establish uniform standards for questionnaires and acknowledgments in the franchise sales process, and specifically to prohibit their use across the board. We saw the majority of registration states adopt the Policy, albeit in different ways.
Once the Policy became effective it was up to each registration state to determine its implementation. During this last renewal season, this meant more and more franchisors added the NASAA prescribed legend to their Franchise Disclosure Documents (a set of statements limiting a franchisor’s ability to waive or disclaim prior representations) and removed certain questionnaires and acknowledgments through various means.
California, Maryland, and Washington required franchisors to include the NASAA legend and remove impermissible questionnaires and acknowledgments from their offering materials. These 3 states adopted the Policy through different rule-making or legal opinion procedures.
- California adopted the Policy by amending its franchise statutes. California’s AB 676 became effective on the same day as the Policy, and, among other changes, prohibits waivers or disclaimers of certain representations in a manner generally consistent with the Policy.
- Maryland adopted the Policy through an agency interpretive opinion. Maryland had already required the inclusion of its own legend restricting waivers or disclaimers in questionnaires and acknowledgments, but going forward has adopted the NASAA legend.
- Washington adopted the Policy by amending its administrative code. Franchisors must comply with the Policy effective September 18, 2023.
In addition to the above, New York amended its Form State Addendum to include the NASAA legend. While not as formal as the states above, we saw Hawaii, Illinois, Minnesota, New York, North Dakota, and Virginia issue comments requiring compliance with the Policy, including the addition of the NASAA legend to various state-specific addenda.
Despite the activity this past summer, the Federal Trade Commission remains silent on questionnaires and acknowledgments. Various states are still adjusting to the Policy and have been updating what they are looking for as the year has gone on. As these requirements are still in flux, please contact us if you have any questions about using questionnaires and acknowledgments, or the current requirements of the various states enforcing the Policy.