Richard E. Johnson

Free initial consultation, Fixed hourly rates, Fixed fees available

Serving Kennesaw, GA

  • Serving Kennesaw, GA

  • Free initial consultation, Fixed hourly rates, Fixed fees available

Member at firm The Johnson Franchise Law Firm, LLC

Serving Kennesaw, GA

Free initial consultation, Fixed hourly rates, Fixed fees available

The North American Securities
Administrators Association (“NASAA”) publishes guidelines and commentary about
the federal franchise rule (“The Franchise Rule”).  NASAA does not, strictly speaking, have
regulatory authority. However, its
guidelines and commentary are considered persuasive authority. State regulators use them when they evaluate franchise
offering documents, and they require franchise offering documents to conform to
them. As a result, NASAA’s guidelines
and commentary are, for all practical purposes, requirements.

NASAA has adopted a new “Multi-Unit
Commentary.” The Multi-Unit Commentary
provides requirements for disclosures about multi-unit franchise offerings. A multi-unit franchise is, just as its name
implies, a franchise where the franchisee has the right (or obligation) to open
multiple businesses or outlets.

Specifically, the Multi-Unit
Commentary provides requirements for franchisors that offer:

?? Area development rights

?? Master franchises and subfranchises

?? Area representative rights (i.e.,
area directorships)

Most franchisors offer one or more
of these. The Multi-Unit Commentary
clarifies how the franchisor must make disclosures about its multi-unit
franchise offering. As one example, the Multi-Unit
Commentary may require the franchisor, in some instances, to prepare (and to register
or obtain an exemption from registration, as appropriate) two separate
Franchise Disclosure Documents: (i) one for the multi-unit rights the
franchisor offers; and (ii) one for the single-unit rights the franchisor may
grant under the umbrella of the multi-unit rights. As another example, the Multi-Unit Commentary
describes how franchisors must disclose information about multi-unit developers
in their franchise disclosure documents.

In many instances, franchisors may
structure their franchise offerings to avoid the additional costs and burdens
described in the Multi-Unit Commentary.

The Johnson Franchise Law
Firm consulted with NASAA about the Multi-Unit Commentary.
If you offer
multi-unit franchises,
contact the Johnson Franchise Law Firm today to discuss: (i) the Multi-Unit Commentary’s effect on
your franchise offering; and (ii) how you may reduce your costs of
compliance.

NASAA has adopted a new “Multi-Unit Commentary.” The Multi-Unit Commentary provides requirements for disclosures about multi-unit franchise offerings. A multi-unit franchise is, just as its name implies, a franchise where the franchisee has the right (or obligation) to open…

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