Franchise Disclosure Document
Our significant objective is to work with you to prepare and finalize the initial version of your Franchise Disclosure Document (“FDD”), including your Franchise Agreement and ancillary documents. However, we are planting a garden rather than chiseling a statue. In other words, your franchise documents will evolve over time as your franchise system grows and develops. In the future, we can “pull weeds” by removing provisions in your franchise documents that prove unfruitful. We can “plant new flowers” in your franchise documents to react to new opportunities and to learn from experiences in your franchise system.
Annual Updates To Your Franchise Disclosure Document (“FDD”)
You must update your Franchise Disclosure Document at least annually to include (at a minimum) new, updated financial statements; cost estimates; and information about your franchisees. Under Federal Franchise Law, a franchisor must update disclosures in its FDD annually within 120 days of the franchisor’s last fiscal year end. Some states have tighter deadlines.
We help our clients comply with annual update requirements.
In addition, you must update your FDD (and state franchise registrations) whenever a “material” change occurs in the information contained in the FDD. Under state and federal laws, “material” disclosures are generally defined as information that may influence the prospective buyer’s decision whether or not to enter into the franchise purchase transaction.
Material changes may include:
- new litigation disclosures (in Item 3) or bankruptcy information (in Item 4);
- any significant adverse change in your financial situation or in business operations;
- changes to the terms and conditions of your Franchise Agreement; or
- any other material change to disclosure document information.
We endeavor to train our clients to recognize “material” changes, and then we rely upon our clients to inform us of such changes that occur to the information disclosed in their Franchise Disclosure Documents.