North American Securities Administrators Association Sets New Standards for the Use of Questionnaires and Acknowledgements in Franchise Offerings

The North American Securities Administrators Association (NASAA) recently adopted a statement of policy that will limit the use of Questionnaires and Acknowledgements in Franchise Disclosure Documents (FDDs) and franchise agreements in states that have franchise laws that prohibit franchisors from committing fraud, making untrue statements of material fact, or omitting to state a material fact regarding the franchise offering, or states that prohibit or render void any provision or condition that requires a prospective franchisee to agree to a release, waiver, or estoppel that would relieve the franchisor from liability under that law. If a franchisor requires a questionnaire, acknowledgement or other similar document, it must be attached to the FDD and cannot contain certain enumerated provisions. In addition, the statement of policy will also require the inclusion of a specific statement that limits the applicability of the Questionnaires and Acknowledgements.

This change of policy is effective as of January 1, 2023. As a result of this change, we recommend that you suspend use of the questionnaire at this time. We are further evaluating the form of compliance questionnaire that may be used going forward, if any, and will make additional recommendations during the renewal process.