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Franchise Update: Making Changes To Your Franchise Disclosure Document (Part A)
Starting a franchise in New York requires that you provide a Franchise Disclosure Document (FDD) to prospective franchisees. The FDD is meant to disclose specific financial information about your New York business. Under New York state law, there are procedures to follow when making changes to the FDD, including your annual updates and interim changes.
To ensure that you follow state regulations when making changes to your FDD, you can get the professional help of a New York franchise attorney.
Annual Updates to Your FDD
According to law, the Franchise Disclosure Document (FDD) must be updated on an ongoing annual basis. This must be done within 120 days after the franchisor's fiscal year-end. If the updated FDD is not available for use by the end of the 120 day period, the franchisor's sales activities most stop. Therefore, it would be wise to start preparing your audited financial statements early.
Failure to get audited financial statements on time is one of the most common causes for a late renewal. A New York franchise attorney can help you make these preparations. An attorney can also look over your previous FDD for inaccuracies and inconsistencies, and suggest updates to be made for the annual renewal. Some updates to consider include:
- Financial performance representations to reflect the current data;
- Contract amendments;
- Initial investment estimates verified against the recent experiences of franchisees; and
- Issues beyond the FDD requirements that would impact a prospect's decision.
When updating your FDD, it is a good idea to have it reviewed by a New York franchise attorney. An experienced New York franchise attorney may catch a critical mistake, and they may have some suggestions on how to improve your franchise disclosures.
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