Written Substantiation of FPR - Asking for the Backup

The franchisor must have written substantiation in its files for any financial performance representation - also called an FPR - made in Item 19 of its FDD. On reasonable request by a prospect, you or the franchisor must make available to the prospect the written substantia- tion for any FPR. You and the franchisor must establish and maintain a system for documenting receipt of these requests, and responding promptly to these requests.

1. Who May Ask For Substantiation. A person who has not yet qualified or been accepted as a prospect may not make a request that triggers this obligation. Only a request from a bona fide prospect who has received an FDD containing an FPR triggers this obligation.

2. Form of Request. The FTC franchise rule does not require a request to be in writing, so you may not require a prospect to submit the request in writing. Presumably, most prospects will make requests by telephone or in emails.

3. Timing for Response. The FTC franchise rule does not say how quickly the written substantiation must be made available after it is requested. The FTC franchise rule assumes prompt responses, but permits some flexibility if, for example, a request is made at an inconvenient time or the franchisor needs a reasonable period of time to review the written substantiation before making it available.

4. Form of Response. The written substantiation is not required to be in any particular format. The FTC franchise rule states that the written substantiation must be "made available" to a prospect, not that it must be "furnished," "provided" or "delivered" to a prospect. The use of "made available" indicates that it may be sufficient to give the prospect a reasonable opportunity to review the written substantiation at the franchisor's office or at another mutually convenient location, and that it may not be necessary to give the prospect copies of the written substantiation, which may contain personal or highly confidential information. 

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