Why Maintaining an Updated and Current FDD is a Critical Obligation for Franchisors

As a franchisor‚ you are probably well aware of your obligation to properly disclose and deliver your FDD to prospective franchisees. However‚ too many franchisors and‚ even‚ franchise lawyers‚ fail to realize the ciritical significance of FDD updates and renewals. Sure‚ everyone is aware (at least‚ I hope) of the annual update and registration renewal process‚ however you may be required to update and re-register your FDD on a more frequent basis. The following are some update timelines you need to be aware of:

1. Annually. You must update / re-file registrations‚ renewals and notices within 120 days from close of the fiscal year annually.
2. Quarterly. Any material changes in your franchise relationship‚ franchise company‚ or franchise offering requires a quarterly update.
3. Immediately. If Item 18 of your FDD is updated and includes financial performance representations‚ you must update your FDD immediately.

WHY DOES THIS MATTER – Because if your FDD is not both current and registered (in applicable states) you will be forever tainting your franchise sales process. Consider that your future right to “rescind” your franchise agreement and their obligation to pay royalties.

LEARN MORE: In the following video I discuss this topic in more detail.

Date: 04/22/2013 | Category: Start a Franchise