As a franchisor, you must update your Franchise Disclosure Document every year in order to keep selling
franchises. The FDD update can be a chaotic, complicated and time-consuming process if you don’t manage it properly. Here are six tips for your FDD update from franchise attorney Peter Dosik:
- Know Your Deadlines. Under the Franchise Rule of the Federal Trade Commission, your FDD expires 120 days after your fiscal year end. So, if you operate on a normal calendar year, your FDD expires on April 30. In the registration states, the FDD expiration date will vary. It often runs one year from the date of the previous year’s registrations. When the FDD expires nationally, you must immediately cease all sales activity. If the FDD first expires in a particular state, then you must cease all sales activity in that state.
- Keep A Running FDD Issues List All Year Long. Don’t wait until the update process starts to start identifying changes. You should maintain a list year-round with issues, typos, corrections, questions, business changes, and other items to address in your next FDD.
- Get Started Early. We recommend you begin the annual update process at least three months before the FDD expires.
- Plan Your Update Process. With so many details to check and update, it’s crucial to set a process to identify each task that needs to be done, how much time it will take, and who is going to do it. You should work closely with an experienced franchise attorney to plan the process.
- Alert Your Auditors. Make your auditors know your FDD deadline and are prepared to meet it.
- Be Prepared For Transition to the New FDD. Your sales team (and other executives) should review a “redline” of the new FDD, showing all of the changes from the previous year, and have a clear understanding of each change. Make sure your sales team is aware of your calendar with issuing the new FDD, so they can try to close deals before the transition. They also need to know which states you plan to file or register the FDD, and any “dark” periods in registration states. Any prospects in the pipeline when you transition to the new FDD must be re-disclosed with the new FDD.
About Shipe Dosik Law LLC: Franchise Marketing Systems recommends Shipe Dosik Law LLCwww.shipedosiklaw.com for franchise law counsel. All FMS clients receive a discounted rate on legal services. If you engage Shipe Dosik Law, you will receive the highest quality legal support for 25-40% less cost than comparable franchise lawyers. Make sure to mention Franchise Marketing Systems.
|Pete Dosik is a Franchise Times® Legal Eagle and was the 2012-13 Chair of the Georgia Bar Association’s Franchise Section. Pete’s background includes five years as in-house counsel to Church’s Chicken, which operates 250+ restaurants and franchises 1450+ restaurants in 23 countries. He graduated from Duke Law School in 1997.
Call for a FREE FDD consultation 800-610-0292