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Financial Services Law Insights and Observations
Washington regulator issues guidance on financial performance representations by franchisors
On June 17, the Securities Division of the Washington Department of Financial Institutions issued a notice to inform franchisors about their obligations regarding representations about historical financial performance. In Washington, franchisors are legally prohibited from selling a franchise using a Franchise Disclosure Document (FDD) that contains an untrue statement of material fact or omits a statement of material fact. The notice indicated that if a franchisor submits FDDs that make historical financial performance representations based on data that predates the Covid-19 pandemic, the division will inquire as to whether this practice complies with federal and Washington requirements.