Many franchisors elect to include disclaimers in their Franchise
Disclosure Documents (FDD) and Franchise Agreements relating to
certain representations that may have been made (or not made)
during the franchise sales process. These disclaimers are typically
in the form of a questionnaire that consist of a series of
questions asking a prospective franchisee to check "yes"
or "no" to questions relating to the franchise sales
process. For example, the "prospective franchisee has read and
understands the FDD and all attachments to the FDD, including the
Franchise Agreement"; "Franchisor has not made any
representation, including financial performance representation,
outside of or different from the FDD and its attachments"; and
similar questions. On September 20, 2022, the North American
Securities Administrators Association, Inc. (NASAA) released a
Statement of Policy Regarding the Use of Franchise Questionnaires
Effective, January 1, 2023, NASAA's Statement of Policy provides for certain policies regarding the use of these questionnaires in FDDs and Franchise Agreements. First, if a franchisor chooses to ask prospective franchisees to sign a questionnaire at the end of the sales process, that questionnaire needs to be referenced in Item 22 of the FDD and attached as an exhibit to the FDD. Moreover, if the franchisor asks a prospective franchisee to verbally respond to a questionnaire on video, a written script must be referenced in Item 22 and attached to the FDD as an exhibit.
Second, the policy prohibits the use of any statements or questions that would cause a prospective franchisee to surrender (or believe they have surrendered) any rights under federal or state law or that would shift a franchisor's disclosure duties under appliable law. The policy also includes a list of prohibited statements or questions to be included in the questionnaire.
Third, the franchisor must include in its FDD and franchise agreement a specific statement that the questionnaire or any other statement or acknowledgment signed or agreed to by the prospective franchisee shall not have the effect of waiving any claims under applicable state franchise laws or disclaiming any reliance on any statement made by the franchisor, franchise seller, or other person acting on behalf of the franchisor.
The full Statement of Policy can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.