All franchisors and their legal counsel focus on the annual Franchise Disclosure Document update that must be completed within 120 days of the franchisor's fiscal year end. Typically, everyone is relieved that the project is done for the year. However, franchisors have an ongoing legal obligation under both federal and state franchise laws to amend the FDD during the year if a material change has occurred.
It will soon be that time of year when we will be working with our franchisor clients to prepare the required year-end updates to their Franchise Disclosure Document and file state registration renewal applications.
On September 16, 2014, the Franchise and Business Opportunity Project Group of the North American Securities Administrators Association (NASAA) issued a Multi-Unit Commentary to provide guidance in addressing certain disclosure requirements in 3 different types of multi-unit franchising structures. All of the state franchise regulators are members of NASAA so we can expect that the state franchise regulators will follow the guidelines addressed in the commentary in 2015. The effective date of this Commentary is 180 days after the date of adoption, or 120 days after the franchisor's next fiscal year end for Franchise Disclosure Documents already in existence.