California Consumer Privacy Act (CCPA):
Considerations for Franchisors

By introducing the California Consumer Privacy Act, California continues its pattern of enacting legislation that has the potential to impact the franchise industry in a significant way. The CCPA applies to any company that “does business” in California (which is a broad category) and that meets the criteria explained below.  If your franchise company is based in California, or (potentially) even…

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Advertising Franchises

Franchise for sale!  Only fifty cents (well, not really but you get the idea).  You have some amazing advertising pieces to sell your franchise.  So you can just use them however and wherever you want, right?  No. This would be too simple. Certain states require you to pre-file advertising materials and wait a specified time before using them in the state.  Some states require that you register…

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California’s Assembly Bill No. 5 (AB-5)

Sometimes it Pays to Wait-and-See

Many franchisors are wondering what changes they should make in response to California’s AB-5 that went into effect on January 1, 2020. In a nutshell, we don’t think it makes sense to make any significant changes to a franchise system because the applicability of AB-5 to franchisors isn’t fully determined, and there will likely be changes to this law in 2020. The purpose of AB-5 is to crack down…

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Item 19 Financial Performance Representations in the time of COVID

You’ve probably heard the phrase, “COVID ruined everything” more than once. And unfortunately, we’re here to tell you the same likely applies for Item 19 financial performance representations (FPRs). Any operating results presented in Item 19 must have a reasonable basis and cannot be misleading. If COVID has caused (1) a drop in revenue, (2) temporary or permanent store closures or (3) changes…

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Should I have a financial performance representation (FPR) in my FDD?

When I get asked this question, I respond as follows: “The FDD has 23 Items. If there were just one Item in the Franchise Disclosure Document (FDD) you could look in deciding whether or not to buy a franchise, which Item would it be? I don’t care what it is, how much it costs, I need to know if it makes money.” FDDs tend to be packed with information and details, and prospective franchisees often…

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California Franchise Exemptions:

A Franchisor’s “FastPass” to Selling Franchises

Nobody wants to wait in line…especially when you’ve worked hard and paid a lot of money just to get to the entrance. Disneyland first introduced the FastPass in 1999. This pass lets them skip the long lines for popular rides. It’s a win-win because FastPass frees guests to enjoy their time—and spend more money—elsewhere in the park. In California, the process to register a new franchise offering…

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Selling Franchises in Registration States

I’ve just issued my FDD and want to start selling franchises with it. What are the next steps? This depends on where you’d like to sell franchises. Registration states require you to file your FDD and pay a fee, and most of these states have a formal comment letter process. Before you can start selling in the registration states, you’ll need to receive an acknowledgement or permit from the……

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Required Financials for Your FDD

1. What financials are required for a franchisor operating in the United States? The Federal Trade Commission requires audited financials for the franchisor for the last three fiscal years before the Franchise Disclosure Document issuance date. This means you need a balance sheet for the last two fiscal year-ends and a statement of operations, stockholders’ equity, and cash flows for the last…

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