Can an FDD Be Disclosed Electronically?
Yes, an FDD may be disclosed electronically. Electronic disclosure includes delivery over the Internet and other electronic means provided that the FDD is directly conveyed to and received by the prospective franchisee. You should carefully review state-specific requirements for FDD electronic delivery and comply with the following FDD disclosure requirements published by NASAA:
(i) The FDD must be delivered as a single integrated document or file in a format that cannot be modified (such as a locked PDF);
(ii) The FDD, electronically delivered, must have no extraneous content beyond what is required to be disclosed in an FDD under the Federal Franchise Rule and state-specific franchise laws. However, electronic disclosure may include "customary devices for manipulating electronic documents in machine-readable form and tools or access to tools that may be necessary or convenient to enable the recipient to receive and view the disclosure document";
(iii) The FDD has no links to or from external documents or content;
(iv) The FDD is delivered in a form that intrinsically enables the prospective franchisee to store, receive, and print it; and
(v) As franchisor, you must maintain records of the electronic delivery of your FDD to each prospective franchisee and you must be able to prove that the FDD was timely disclosed to each prospective franchisee in accordance with these electronic disclosure requirements.
When disclosing your FDD electronically, you must ensure that your records include an electronically signed FDD receipt page. You cannot deliver the Item 23 receipt page separately to your prospective franchisees. The Item 23 receipt page must be included as an integrated part of the electronically disclosed FDD and must provide for the prospective franchisee’s electronic signature and date. Your Item 23 receipt should include the names of “franchise sellers” involved in the franchise sale. The franchise seller are those individuals who were primarily responsible for the franchise sale.
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