Franchisors know the importance of timely, accurate Franchise Disclosure Documents (FDDs) for compliance with franchise laws and trust in the franchise system. As previously discussed, federal and state laws require annual FDD updates, but franchisors are not relegated to this once-a-year review. Volatility and changes in national and world markets can influence FDD updates. In August, the North American Securities Administrators Association (NASAA) recently released new guidance clarifying the evolving material changes—such as shifts in economic conditions, supply chains, or key costs—that may require franchisors to amend their FDDs well before the next scheduled annual filing.
Let’s (re)familiarize ourselves with NASAA and explore why this new guidance should inspire conversations between franchisors and their NY franchise lawyers.
Understanding NASAA and Its Franchise Relationships
NASAA is a membership organization comprised of securities regulators (which includes franchise regulators) in the United States, Canada and Mexico. NASAA has proposed rules to govern certain areas of franchising, such as in 2024, when it proposed the Model Franchise Broker Registration Act.
While NASAA does not have direct enforcement authority, it does coordinate and support the enforcement actions of its member agencies. NY franchisors in particular should familiarize themselves with NASAA, since franchisors are required to register their franchise offerings with the NY Department of Law.
NASAA’s newest guidance was issued on Aug. 6, 2025 and is titled, Impact of Shifting Market and Economic Factors on Franchise Disclosures. The guidance builds on the lessons learned from COVID and applies them to franchising – specifically with regard to material changes.
What Constitutes as a “Material Change”?
A “material change” might vary by state, but is generally any new fact, event, or situation that could influence a prospective franchisee’s investment decision. Examples include significant price fluctuations, supply chain disruptions, delays in opening new locations, or any factor that alters the estimated costs or performance metrics disclosed in the FDD.
Ultimately, materiality is determined from the point of view of the franchisee. NASAA’s guidance makes it clear: if these kinds of changes occur, franchisors must update their disclosures—in real-time, not just during annual renewal.
Key Points from NASAA’s Guidance
Transparency is critical: Franchisors can no longer rely on general disclaimers about “market uncertainty” or add language that suggests prospective franchisees should not rely on disclosed information. All material facts must be accurately presented and updated.
Specific FDD Items that may be affected:
- Item 5 (Initial Fees) and Item 6 (Other Fees): Disclose low-high ranges or transparent formulas if fees are likely to change. Learn about Items 5 and 6 here.
- Item 7 (Estimated Initial Investment): Update projections and ranges for costs like equipment, inventory, or build-out. Learn more about Item 7 here.
- Item 11 (Franchisor Obligations – Outlets and Development Timelines): Address delays or complications affecting timeframes and openings. Learn more about Item 11 here.
- Item 19 (Financial Performance Representations): Ensure all earnings and sales projections are still accurate and explain the basis for any changes. Item 19 is the only optional provision, as previously discussed.
How Does This Impact Franchisors and Stakeholders?
Franchisors must now monitor emerging risks and changes—such as inflation, tariffs, labor shortages, or supply interruptions—throughout the year. If anything occurs that could significantly affect franchisees, immediate action is required. This protects prospective franchisees, fosters trust, and shields brands from legal and regulatory exposure.
For franchise lawyers, business leaders, and compliance teams, FDD planning is more important than ever. Develop systems to routinely review economic trends, gather data from systemwide operations, and assess whether new events rise to the level of materiality.
NASAA’s guidance removes any doubt: Franchisors cannot wait for annual filings to disclose material changes. Stay vigilant, communicate clearly with your teams, and prioritize timely, transparent FDD updates. These steps will help protect your system’s reputation and keep your disclosure practices firmly in line with evolving legal requirements.
Franchisors with questions or concerns about NASAA guidance and FDD material changes should consult with their NY franchise lawyer.
Contact Lusthaus Law
Lusthaus Law’s website is a resource for New York franchisors and franchisees. We have published two downloadable and complimentary e-books and our Insights blog is regularly updated to reflect industry trends and recent achievements in client representation.
Contact us today to learn more about how Lusthaus Law P.C. can help you navigate a clear path for your franchise’s successful future.
