Economic changes happen fast. Whether it’s inflation, labor shortages, supply chain disruptions, or shifts in consumer demand, the business climate today can feel like it’s in constant motion. For franchisors, these changes don’t just affect operations; they can directly impact what you must disclose to potential franchisees in your Franchise Disclosure Document (FDD).
On August 6, 2025, the Franchise and Business Opportunities Project Group of the North American Securities Administrators Association (NASAA) released new guidance aimed at helping franchisors adapt their disclosure practices when market conditions change.This guidance still matters, even for states where filing and registration isn’t required.
Every franchisor offering franchises must comply with the Federal Trade Commission (FTC) Franchise Rule and state franchising laws. NASAA guidance helps bridge the gap between federal and state law, and many states adopt NASAA guidelines or their regulators look to NASAA for guidance on interpretation of their laws. Ignoring these obligations and guidelines can lead to costly disputes or regulatory problems. Understanding NASAA guidance demonstrates the sophistication of your brand in the franchise industry.
Market Shifts Don’t Excuse Non-Compliance
The first and most critical point is simple: there’s no “pause button” on compliance.
Even if rising prices, delayed shipments, or workforce shortages are making life difficult, the FTC Franchise Rule still requires complete, accurate, and timely disclosures.
NASAA’s guidance makes it clear, general disclaimers like “figures may change due to market conditions” are not acceptable. You can’t tell prospective franchisees to “not rely” on information in the FDD. Every number and statement must be accurate at the time it’s given, or promptly updated if circumstances change materially.
Which FDD Items Require Extra Attention
Economic shifts can impact multiple sections of the FDD. Franchisors should pay special attention to these areas:
- Initial Fees
If your upfront fees might vary due to cost changes, you must disclose either a range (low to high) or a formula for calculating those fees. Transparency is the priority; prospects need to see how market factors could influence what they pay. - Other Fees
This includes royalties, advertising contributions, technology fees, and more. Like Initial Fees, you must explain the amount, timing, refundability, and whether fees are uniform. If fees could change, provide a formula or range. - Estimated Initial Investment
Here, you must estimate all the costs required to get the business open. If prices are volatile, ranges or formulas can help. Pay special attention to the “additional funds” category, which should cover at least three months of operations, and possibly longer for your industry. - Opening Timeline
Disclose the typical time from signing the agreement to opening day, plus factors that could cause delays, such as equipment backlogs or construction shortages. - Financial Performance Representations (FPRs)
If you choose to make an earnings claim, it must be backed by real, factual data. If conditions change in a way that affects that claim, you must reassess and, if necessary, amend the FDD.
When You Must Amend For FDD Compliance
Youl have to keep your FDD current under state and federal law. You may need to amend the document mid-year if:
- There’s a significant change in initial or ongoing costs.
- Development timelines are delayed in a way that would matter to a buyer.
- The performance data you’ve disclosed is no longer accurate.
For franchisors who also sell in “registration states” like California or New York, the amendment must also be filed with those states’ regulators before use.
Specificity Is Key
At NASAA 2025, they emphasized that vague references to “economic uncertainty” aren’t enough. If you’ve calculated your cost ranges or timelines based on certain factors, such as shipping delays or wage increases—spell them out. This level of detail not only meets your legal obligations but also builds trust with prospective franchisees.
How Franchisors Can Put This Into Practice
While the guidance is clear, applying it in the real world can be complex, especially if your franchise system is growing quickly. Here are some practical steps franchisors can take:
- Build Flexibility into Disclosures
Use ranges and formulas where possible so your FDD remains accurate even when conditions change. - Track Key Cost Drivers
Monitor things like supplier pricing, labor rates, and shipping lead times. These can be early warning signs that an amendment may be needed. - Document Your Basis for Estimates
Keep records of the data you used to calculate costs and timelines. If regulators ever ask, you’ll be ready to show your work. - Review and Update Regularly
Don’t wait until renewal season. Set quarterly or biannual reviews to catch material changes early. - Train Your Sales Team
Make sure your development team knows what they can and cannot say. Even verbal “disclaimers” that contradict the FDD can create liability.
Why Legal Guidance Is Essential
The stakes are high. Inaccurate or outdated disclosures can lead to franchisee disputes, regulatory investigations, or worse, rescission claims where the franchisee demands their money back.
While the guidance offered at NASAA 2025 is aimed at clarity and transparency, the rules about when and how to update an FDD are not always straightforward. That’s why franchisors, especially those operating in multiple states, should have a legal professional who understands both federal requirements and the nuances of state franchise law.
A knowledgeable attorney can:
- Evaluate whether a market change is “material” and triggers an amendment.
- Draft disclosures that meet the specificity NASAA now expects.
- Ensure your practices align with both the FTC Franchise Rule and any applicable state laws.
This isn’t just about avoiding penalties, it’s about protecting your brand, your relationships with franchisees, and the long-term health of your franchise system.
NASAA 2025 guidance is a reminder that in franchising, transparency isn’t optional—it’s the foundation of compliance and trust. Franchisors who stay proactive, keep their disclosures specific and accurate, and work closely with experienced legal counsel will be best positioned to navigate whatever the market throws their way.
