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Franchise Registration And Disclosure Guidelines Form. This is a North Dakota form and can be use in Blue Sky Secretary Of State.
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NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC (“NASAA”)
2008 FRANCHISE REGISTRATION AND DISCLOSURE GUIDELINES
(Amended and Restated UFOC Guidelines)
On January 23, 2007, the Federal Trade Commission (“FTC”) adopted a final amended Franchise
Rule (“Amended FTC Franchise Rule”). 16 C.F.R. Part 436. As of July 1, 2008, all franchisors must
prepare and distribute disclosure documents that, at a minimum, comply with the disclosure format of the
Amended FTC Franchise Rule. Under the Amended FTC Franchise Rule, states may impose additional
requirements under state law consistent with the Amended FTC Franchise Rule.
The North American Securities Administrators Association (“NASAA”) has adopted the
disclosure requirements of the Amended FTC Franchise Rule, with minimal additional requirements, as
the successor to the Uniform Franchise Offering Circular Guidelines adopted on April 23, 1994. The
NASAA-adopted Amended FTC Franchise Rule is attached in Part VII. As of July 1, 2008, Franchise
Filing States will only accept for filing Franchise Disclosure Documents prepared under the Amended
FTC Franchise Rule in accordance with the Instructions set forth below. This requirement does not affect
any Franchise Disclosure Document registered by a Franchise Filing State before July 1, 2008 if the
Franchise Disclosure Document otherwise complies with applicable state law and the Amended FTC
Rule. These NASAA Franchise Registration and Disclosure Guidelines replace the NASAA Uniform
Franchise Offering Circular Guidelines as of July 1, 2008.
I.
Franchise Filing States
The “Franchise Filing States” are the states that have adopted these NASAA Guidelines.
II.
Uniform Franchise Registration Application
A.
Forms
In order to register a franchise in the Franchise Filing States, the following application documents
must be used by a franchisor if and as required by the state:
1.
Uniform Franchise Registration Application (Form A);
2.
Franchisor’s Costs and Sources of Funds (Form B);
3.
Uniform Franchise Consent to Service of Process (Form C);
4.
Franchise Seller Disclosure Form (Form D);
5.
Franchise Disclosure Document (see Part III below);
6.
Application Fee (varies by Franchise Filing State);
7.
Guarantee of Performance (if required) (Form E);
8.
Consent of Accountant (or a photocopy of the consent) to the use of the latest
audit report in the Franchise Disclosure Document (Form F); and
9.
Advertising or promotional materials (if required by the Franchise Filing State).
Copies of Forms A, B, C, D, E and F are attached in Part V. Instructions for preparation
immediately follow each Form.
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B.
Form of Initial Application
1.
An application for an initial registration must contain:
(a)
One copy of a complete franchise registration application, including the
Franchise Disclosure Document, on paper; and
(b)
One copy of the complete franchise registration application, including
Franchise Disclosure Document, on a CD-ROM, in Portable Document
Format (PDF) format.
2.
3.
If a Franchise Filing State examiner requires changes to any documents
submitted, the franchisor must file a complete clean copy of the revised
Franchise Disclosure Document and any other revised documents, and a blacklined copy of all revised pages, unless the examiner directs otherwise. In
addition to filing the complete clean Franchise Disclosure Document and blacklined pages on paper, a franchisor must include copies on a CD-ROM, in PDF
format.
4.
C.
The cover letter submitting the filing must contain a representation that all of the
information contained in the electronic file is identical to the paper documents.
In addition, the electronic version of the Franchise Disclosure Document should
be text searchable.
Do NOT use margin balloons or color highlights to show changes.
Form of Renewal or Amendment Application
1.
An application to renew or amend a franchise registration must contain:
(a)
One copy of a complete franchise renewal or amendment application,
including two copies of a complete updated or amended Franchise
Disclosure Document on paper. One paper copy of the complete updated
or amended Franchise Disclosure Document must be black-lined to show
all additions, deletions and other changes from the applicant’s previous
submission; and
(b)
One copy of the complete franchise renewal or amendment application,
including a clean and black-lined copy of the Franchise Disclosure
Document on a CD-ROM, in PDF format.
2.
The cover letter submitting the filing must contain a representation that all of the
information contained in the electronic file is identical to the paper documents.
In addition, the electronic version of the Franchise Disclosure Document should
be text searchable.
3.
If a Franchise Filing State examiner requires changes to any documents
submitted, the franchisor must file a complete clean copy of the revised
Franchise Disclosure Document and any other revised documents, and a black-
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lined copy of all revised pages, unless the examiner directs otherwise. In
addition to filing the complete clean Franchise Disclosure Document and blacklined pages on paper, a franchisor must include copies on a CD-ROM, in PDF
format.
4.
III.
Do NOT use margin balloons or color highlights to show changes.
The Franchise Disclosure Document
A.
Format
The Franchise Disclosure Document must be prepared in the format required under the Amended
FTC Franchise Rule (See Part VII below) and in accordance with the NASAA requirements listed below.
B.
State Cover Page
The Franchise Disclosure Document must include the following State Cover Page prepared in
accordance with these Instructions, which must immediately follow the FTC required Cover Page (See
Part VII below):
1.
State the following legend:
STATE COVER PAGE
Your state may have a franchise law that requires a franchisor to register or file with a state
franchise administrator before offering or selling in your state. REGISTRATION OF A
FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE
FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE
DOCUMENT.
Call the state franchise administrator listed in Exhibit ___ for information about the franchisor or
about franchising in your state.
2.
State the following:
MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW
UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN
A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO
CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT
RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU
MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.
3.
If any of the following apply, state the following, using capital letters as shown:
Please consider the following RISK FACTORS before you buy this franchise:
THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY
[LITIGATION/ARBITRATION/MEDIATION] ONLY IN [STATE].
OUT-OF-STATE
[LITIGATION/ARBITRATION/MEDIATION] MAY FORCE YOU TO ACCEPT A LESS
FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO
[LITIGATE/ARBITRATE/MEDIATE] WITH US IN [STATE] THAN IN YOUR OWN STATE.
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THE FRANCHISE AGREEMENT STATES THAT [STATE] LAW GOVERNS THE
AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND
BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
4.
In addition to the above, disclose other risk factors required by a State
Administrator.
5.
If one or more risk factors applies, also state:
THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
6.
If you use the services of a franchise broker or referral source, state the
following:
We use the services of one or more FRANCHISE BROKERS or referral sources to assist us in
selling our franchise. A franchise broker or referral source represents us, not you. We pay this
person a fee for selling our franchise or referring you to us. You should be sure to do your own
investigation of the franchise.
7.
(a)
State the following:
Effective Date:
(b)
Leave the effective date blank until notified of effectiveness by the state
administrator.
(c)
If an applicant is using a multi-state disclosure document, the applicant
may list multiple state effective dates together on a separate page which is to be
inserted immediately following the State Cover Page.
A sample State Cover Page and State Effective Date page are attached as Form G of these
Instructions.
C.
Disclosure Timing Requirements
If applicable state law requires a franchisor to provide the Franchise Disclosure Document earlier
than the 14 calendar-days provided for in the Amended FTC Franchise Rule, the franchisor must add a
statement to the Receipt pages of the Franchise Disclosure Document to accurately reflect the state law
requirements for delivery of the disclosure document. A sample Receipt Page is attached as Form H.
IV.
Instructions for Preparation of the Franchise Disclosure Document
A.
Preparation of Disclosure Documents
NASAA has adopted the following instructions for preparation of Franchise Disclosure
Documents:
1.
Disclose all required information clearly, legibly, and concisely in a single
document using plain English. Plain English means the organization of
information and language usage understandable by a person unfamiliar with the
franchise business. It incorporates short sentences; definite, concrete, everyday
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language; active voice; and tabular presentation of information, where possible.
It avoids legal jargon, highly technical business terms, and multiple negatives.
2.
The disclosure must be in a form that permits each prospective franchisee to
store, download, print, or otherwise maintain the document for future reference.
3.
The disclosure for each Item must be separately titled and in the required order.
Do not repeat the question in the disclosure document. Respond to each question
fully. If the disclosure is not applicable, respond in the negative, but if an answer
is required “if applicable,” or “to the extent known,” respond only if the
requested information applies. Do not qualify a response with a reference to
another document unless permitted by the instructions to that Item. Precede each
disclosure Item with the appropriate heading.
4.
Franchisors may prepare multi-state disclosure documents by including nonpreempted, state-specific information in the text of the disclosure document or in
State Addenda attached to the disclosure document. The State Addenda may be
included in an exhibit attached to the Franchise Disclosure Document. Any
amendments to the franchise agreement may be included in the State Addenda
exhibit or in a separate exhibit immediately following the franchise agreement or
document being amended.
5.
The two copies of the Item 23 Receipt pages must be the last two pages of the
Franchise Disclosure Document and attached after all the exhibits.
6.
Before furnishing a disclosure document, the franchisor must advise the
prospective franchisee of the formats in which the disclosure document is made
available, any prerequisites for obtaining the disclosure document in a particular
format, and any conditions necessary for reviewing the disclosure document in a
particular format.
7.
For the sole purpose of enhancing the prospective franchisee’s ability to
maneuver through an electronic version of a disclosure document, the franchisor
may include scroll bars, internal links, and search features. All other features
(e.g., multimedia tools such as audio, video, animation, pop-up screens, or links
to external information) are prohibited.
8.
Franchisors must retain, and make available to the State Administrators, upon
request, a sample copy of each materially different version of their disclosure
documents for the period required by the applicable law of the Franchise Filing
State.
9.
For each completed franchise sale, franchisors must retain a copy of the signed
receipt for the period required by applicable laws of the Franchise Filing States.
10.
For each Item, type the Item’s Arabic numbers and title. Identify Exhibits by a
letter of the alphabet.
11.
Separate documents (for example, a confidential operations manual) must not
make representations or impose terms that contradict or are materially different
from the disclosure in the Franchise Disclosure Document.
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12.
Use 8½ by 11 inch paper for the Franchise Disclosure Document and other forms
submitted to the Franchise Filing States. The text of the Franchise Disclosure
Document must be clearly readable and presented in at least 11 point type. Tables
in the Franchise Disclosure Document and separately attached documents not
prepared by the franchisor may be presented in less than 11 point type as long as
the text is clearly readable.
13.
When the applicant is a master franchisor seeking to sell master franchises
(subfranchises), references in these requirements and instructions to “franchisee”
include the master franchisee (subfranchisor).
14.
The offer of master franchises (subfranchises) is an offer separate from the offer
of franchises and usually requires a separate registration or exemption. A single
application may register the sale of single unit and multi-unit franchises if the
disclosure document is not confusing.
15.
In an offering by a master franchisee (subfranchisor), “franchisor” means both
the master franchisor and master franchisee (subfranchisor).
16.
Master franchisees (subfranchisors) must disclose the required information about
the master franchisor, and to the extent applicable, the same information
concerning the master franchisee (subfranchisor).
17.
If the franchise agreement requires a franchisee to sign a release or waiver as a
condition of consenting to some future action, such as a transfer or assignment of
the franchise, include a sample copy of the document the franchisee will be asked
to sign. This requirement does not apply to negotiated releases or waivers that a
franchisee may sign to resolve a dispute with a franchisor.
18.
In a multi-state offering, an exhibit may list all agents for service of process. The
following additional statement may be used if accurate:
“If a state is not listed, [franchisor] has not appointed an agent for service of
process in that state in connection with the requirements of franchise laws. There
may be states in addition to those listed above in which [franchisor] has
appointed an agent for service of process.
There may also be additional agents appointed in some of the states listed.”
19.
When state requirements conflict with these Instructions, the state requirements
control. The State Administrator may modify or waive these Instructions or may
require additional documentation or information.
20.
Grossly deficient applications may be rejected summarily by the State
Administrator as incomplete for filing. It is not the function of a State
Administrator to prepare, in effect, an applicant’s Franchise Disclosure
Document application. The additional examiner time reviewing the grossly
deficient product delays the processing of diligently prepared and pursued
applications.
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B.
Instructions for Updating Disclosures
NASAA has adopted the following instructions for preparation of updated disclosure documents:
1.
2.
File a renewal application before the prior registration has expired, or as required
under applicable state law. If the prior registration has expired, mark “Initial
Registration of an Offer and Sale of Franchises” on the Application page and pay
the fee charged for initial registrations. Black-lining and bracketing changes
from the last filing will speed a re-registration. Do not mark the “Amendment”
boxes on the application page on the first renewal filing even if documents are
revised.
3.
C.
When state law requires renewal or an annual report, mark “Renewal
Application” or “Annual Report” on the Application page. Submit all documents
required for an initial application with additions to the previously filed
documents black-lined. Changes must be clearly marked so that each change is
noticed easily. Do NOT use margin balloons or color highlights to show
changes. Do not use less than 11 point type for changed text. Use a black-lining
system that underlines changes and shows deletions by a strike through.
Follow the form of renewal or amendment application instructions in Part II.C. of
these Guidelines.
Electronic Disclosure
Unless a Franchise Filing State has adopted its own requirements regarding electronic disclosure,
franchisors may deliver a Franchise Disclosure Document electronically by complying with the NASAA
Statement on Policy Regarding Electronic Delivery of Franchise Disclosure Documents, adopted
September 14, 2003. A copy of the NASAA Electronic Disclosure Policy is attached in Part VI.
V.
Forms
The following forms are to be used in preparation of applications and Franchise Disclosure
Documents as required by the Franchise Filing States:
Form A:
Uniform Franchise Registration Application
Form B:
Franchisor’s Costs and Sources of Funds
Form C:
Uniform Franchise Consent to Service of Process
Form D:
Franchise Seller Disclosure Form
Form E:
Guarantee of Performance
Form F:
Consent of Accountant
Form G:
Sample State Cover Page and Sample State Effective Dates
Form H:
Sample Receipt Page
Instructions for preparing Forms A, B, C, D, E, F, G and H follow each of those forms.
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