Must a franchisor include in its disclosure document the financials of its parent when the parent only sells goods or services to franchisees?
The amended Rule requires separate financials for any “parent that commits to perform post-sale obligations for the franchisor or guarantees the franchisor’s obligations.” Thus, this requirement would apply when the franchisor has an obligation to provide goods or services to franchisees, and that obligation is guaranteed or assumed by the franchisor’s parent. If a parent happens to supply goods or services to franchisees where there is no underlying obligation on the part of the franchisor to supply them, then the parent is no different from any other third-party supplier and its financials need not be disclosed. On the other hand, if a franchisor is obligated to provide goods and services and the parent assumes that responsibility, or the franchisor arranges for the parent to provide goods and services directly to franchisees on its behalf, then the parent’s financials must be disclosed. • Item 3 of the amended Rule states that a franchisor must state it was “a party to any material
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