Attorneys, franchisors, and franchisees have all dreamt for years of a single place where they would be able to access Franchise Disclosure Documents. This may be the year that dreams come true. NASAA (North American Securities Administration Association) has received authorization and has been working hard behind the scenes to make this a reality. Although at this time, it is unclear what the timeframe is for this dream to become reality.
NASAA has already created and has been putting to go use an electronic depository for other securities registration documents, now they’re working on one for franchisor Franchise Disclosure Documents (“FDD”) state registration filings. NASAA using their Electronic Filing Depository (EFD) has allows state examiners for securities filings access to the necessary documents for those filings, while at the same time allowing the same documents to be searched and retrieved by the public. Reported at the American Bar Associations’ Forum on Franchising annual convention in October 2019, NASAA has the intent to move forward with allowing FDD filings for all registration states. This ability will give state examiners access to those documents, as well as their state specific forms. The added bonus of having one depository will likely give franchisors the ability to file multiple documents (for each participating state registration) in the Electronic File Depository at the same time. This will streamline state registrations for franchise attorneys and franchisors alike.
So far, the NASAA website located at: https://www.efdnasaa.org/About/EFDStates shows the following states as “in progress” for franchise filings: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. As these states come online it will likely prompt more states to use the service, as many additional states already use the depository for their other security filings.
Commenters on the Depository have expressed excitement that the system would allow more access to the information contained in the Franchise Disclosure Documents. It will be interesting to see if the documents themselves will be searchable (as the form D fillings appear to be) or if it will be a searchable database where the documents are all housed.
What does a national FDD depository mean for you?
If you are a franchisor:
It means being able to find and review competitors FDDs easily. This access will allow you to research your competition and place yourselves well for growth within the franchise market for your offering or industry. Additionally, it will give your sales team, easy research access as well to competitors that are in your vertical, that they have not ran up against previously. Possibly due to entering into a new state market area, or up against a brand-new franchisor’s system.
If you are a franchisee:
It means a one-stop shop which will allow you to compare different franchise systems and offerings easily, in one place for a particular vertical or state that you are interested in. The national FDD depository would also enable you to evaluate a larger variety of franchise systems in your chosen industry, or state.
If you are a franchise attorney:
It means being able to access information in one place, which currently must be researched in several. The depository will save time, which in turn leads to savings for clients. More access also means more information, which in turn can lead to better, more informed advice for clients.
Having access to a multitude of FDD’s will likely make the franchise marketplace more competitive, which will be a win for everyone who is invested in franchising as an industry.
For more information or to schedule a customized consultation for your business, you can write to franchising@SLA.Law or call (866) 99-FRANCHISE.