FDD Disclosure Receipts
One of the most basic regulatory requirements imposed on franchisors related to the delivery of your Franchise Disclosure Document (FDD) to prospective franchisees. That is‚ under the Federal Franchise Rule franchisors must deliver and provide a prospective franchisee with the franchisor's FDD no later than 14 calendar days prior to both (a) receiving any funds or payments from the prospective franchisee and (b) entering into any agreement with the prospective franchisee.
After you enter into a franchise agreement it is critical that‚ internally‚ you maintain a compliance file demonstrating that you properly delivered your FDD and you did so in accordance with federal and state law. The most common method for documenting this compliance matter relates to the "FDD Disclosure Receipt" that should be contained or identified in Item 23 of your FDD. Upon delivering your FDD to a prospective franchisee you must have the prospective franchisee sign the disclosure receipt where‚ among other things they acknowledge the date that they received the FDD.
Other Factors to Consider
It is also important that you deliver the FDD to the right people such as:
- Each individual franchisee
- A principal officer of a corporate franchisee
- The managing general partner of a partnership
- The manager of a limited liability company
Upon delivery of the FDD‚ you should document the following information:
- The date the FDD was received
- The date any addendum to the FDD was received
- The date that completed copies of all agreements to be executed were received by the prospect
- The date that the first agreement was received by the prospect
- The earliest date a check‚ cash‚ or other consideration was delivered by the prospect to a representative of the franchisor‚ and the name of that individual.
Order a complimentary copy of the Franchise Compliance Guide which contains the federal franchise rules and obligations for franchisors.