Virginia Administrative Code
Title 21 - SECURITIES AND RETAIL FRANCHISING
Agency 5 - STATE CORPORATION COMMISSION
Chapter 110 - RETAIL FRANCHISING ACT RULES
Section 21VAC5-110-80 - General requirements for preparation of disclosure documents; record retention; master franchises; electronic disclosure
Universal Citation: 1 VA Admin Code 5-110-80
Current through Register Vol. 41, No. 3, September 23, 2024
A. Disclosure instructions.
1. Disclose all required information clearly,
legibly, and concisely in a single document using plain English.
2. The disclosure for each FDD item shall be
separately titled and in the required order. Do not repeat the question in the
FDD. Respond to each question fully. If the disclosure is not applicable,
respond in the negative, but if an answer is required "if applicable," 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.
3. For each Item in the FDD,
type the requirement's Arabic number and item title. Exhibits should be
identified by a letter of the alphabet.
4. The disclosure must be in a form that
permits each prospective franchisee to store, download, print, or otherwise
maintain the disclosure document for future reference.
5. 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
FDD.
6. Use 8-1/2 by 11 inch paper
for the FDD and other forms. All documents and disclosures must be readable,
using not less than 11-point type.
7. Franchisors may prepare multistate
disclosure documents by including nonpreempted, state-specific information in
the text of the FDD or in a Virginia Addendum attached to the FDD. The Virginia
Addendum may be included in an exhibit to the FDD. Any amendments to the
franchise agreement may be included in the Virginia Addendum or in a separate
exhibit immediately following the franchise agreement.
8. The two copies of the Item 23 receipt
pages should be the last two pages of the FDD and should be attached after all
exhibits.
9. Before furnishing a
FDD, the franchisor must advise the prospective franchisee of the formats in
which the FDD is made available, any prerequisites for obtaining the FDD in a
particular format, and any conditions necessary for reviewing the FDD in a
particular format.
10. Grossly
deficient applications may be rejected summarily by the commission as
incomplete for filing.
B. Retention of records.
1. Franchisors shall retain, and make
available to the commission upon request, a sample copy of each materially
different version of their disclosure documents for a period of three years
after the close of the fiscal year in which the disclosure document was last
provided to a franchisee or prospective franchisee.
2. For each completed franchise sale,
franchisors shall retain a copy of the signed receipt for at least three
years.
C. Master franchises.
1. When the applicant is a master
franchisor seeking to sell master franchises (subfranchises), references in
these regulations to "franchisee" include the master franchisee
(subfranchisor).
2. 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 a single unit and multiunit franchises if
the FDD is not confusing.
3. In an
offering by a master franchisee (subfranchisor), "franchisor" means both the
master franchisor and master franchisee.
4. Master franchisees (subfranchisors) must
disclose the required information about the master franchisor, and to the
extent applicable, the same information concerning the master
franchisee.
D. Electronic disclosure.
1. A franchisor may
deliver a franchise disclosure document over the Internet or by other
electronic means, or in machine-readable media, provided:
a. The disclosure document is delivered as a
single, integrated document or file;
b. The disclosure document has no extraneous
content beyond what is required or permitted by law or regulation, but which
may include customary devices for manipulating electronic documents in
machine-readable form and tools or access to tools that may be necessary or
convenient to enable the recipient to receive and view the disclosure
document;
c. The disclosure
document has no links to or from external documents or content;
d. The disclosure document is delivered in a
form that intrinsically enables the recipient to store, retrieve, and print the
disclosure document;
e. The
disclosure document conforms as to its content and format to the requirements
of applicable law or regulation;
f.
The franchisor can prove that it delivered the disclosure document
electronically in compliance with this subsection, and that it did so at or
before the time required by applicable law or regulation; and
g. The franchisor keeps records of its
electronic delivery of disclosure documents and makes those records available
on demand by the commission.
2. 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 such as audio, video, animation, pop-up
screens or links to external information are prohibited.
3. "Delivery" requires that the disclosure
document be conveyed to and received by the prospective franchisee, or that the
storage media in which the disclosure is stored be physically delivered to the
prospective franchisee in accordance with subdivision 1 a of this
subsection.
4. This subsection does
not change or waive any other requirement of law or regulation concerning
registration or presale disclosure of franchise offerings.
E. Other requirements.
1. 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 the franchisor.
2. The commission may modify or waive the
provisions of this chapter or may require additional documentation or
information.
Statutory Authority
§§ 12.1-13 and 13.1-572 of the Code of Virginia.
Disclaimer: These regulations may not be the most recent version. Virginia may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
