Franchisors: It is Always Critical to Insure that the Statements in Your FDD are Consistent

As a franchisor it is critical to consistently implement with your staff and franchise attorneys a consistent review process to ensure that your FDD is accurate, up to date, and contains representations that are consistent. The Federal Franchise Rule prohibits inconsistent statements in franchise disclosure documents. As such franchisors must insure that the FDD disclosures are not contradicted by verbal statements or non-FDD writings provided to the franchisee.

Too many times FDDs are not realistically drafted. That is, if the FDD is rigidly drafted and does not account for the economic realities faced by your franchise sales staff, chances are, you may be headed toward regulatory compliance issues. This is particularly important when dealing with financial performance representations (FDD Item 19). According to the Federal Trade Commission records the most common regulator incident occurs when a franchisor contradicts its Item 19 disclosure with oral representations by sales staff.

Consistency is key. A realistically drafted FDD is key. An honest and diligent franchise sales compliance program is key. For more information on similar information to making sure your FDD is consistent and accurate read The Ultimate Guide to Franchising Your Business or contact us.

By Charles Internicola December 24, 2010