Franchisors: It’s Time to Focus on the Annual Update for Your FDD!

A popular contributor to Acceler8Success Cafe, Franchise Attorney, Wayne Bunch, Jr. helps our subscribers and readers by providing timely and easy-to-read franchise advice, reminders and tips that will help our readers fortify and expand their knowledge of franchising.

Representing franchisor companies as partner in the Franchise Practice Group of FisherBroyles, LLP, Wayne has extensive experience in assisting franchise brands expand through franchising both domestically and internationally.

Just as Wayne’s previous article at Acceler8Success Cafe was popular with both legacy and emerging franchise brands, I firmly believe today’s information should be of significant interest to ALL franchisors. However, I suggest emerging brand franchisors give this extra attention. As well, this information should be of significant interest to entrepreneurs exploring or already moving toward franchising their business.

Updating Your Franchise Disclosure Document (FDD)

With the new year well underway, it is time to start focusing on the annual update to your Franchise Disclosure Document (“FDD”). Your annual update must be finalized on or before April 30, 2023, or 120 days after your fiscal year ends. The following are things you can begin working on to streamline the updating process:

• Begin working with your CPA to obtain your audited financial statements. This can take longer than expected, and it helps to begin the conversation earlier rather than later.
• If you have brought on additional principal officers or individuals that have management responsibility related to the sale or operation of franchises, be prepared to provide biographical information on these individuals to your attorney for updates to Item 2.
• If there has been any recent litigation, be prepared to share this information with your attorney for updates to Item 3.
• If you wish to alter your royalty or advertising fee structure, this will result in updates not only to your FDD, but also to your Franchise Agreement. Be prepared to discuss this in detail with your attorney.
• Make sure to review your start-up costs in Item 7 and provide your attorney with any changes.
• Be prepared to provide your attorney with very specific information regarding all revenue derived from supplier rebates or from sales directly to franchisees.
• Be prepared to provide your attorney with any changes to your computer system/point of sale system specifications and costs.
• If your FDD contains a Financial Performance Representation or you wish to include one, prepare the necessary information for your attorney to update or include in Item 19.
• Be prepared to assist your attorney with the completion of the tables in Item 20, and to provide an updated list of current and past franchisees.

This is not an exhaustive list of necessary updates, however, having this information readily available for your attorney will not only expedite the updating process, but also save your attorney time and effort resulting in reduced legal cost.

Lastly, going through the annual updating process is a very good opportunity to re-acquaint yourself and your salespeople with the contents of your FDD.

Remember, your FDD must be accurate and not miss any important information about you, your franchise company, or the franchise opportunity.

Knowing the full content of your FDD is critical because in any franchise sales process, information provided to a prospect must be completely consistent with the information found in your FDD.

To learn more about Wayne P. Bunch, Jr., please check out his LinkedIn profile or if you’d like to speak with Wayne, he may be contacted directly via email to Wayne.Bunch@fisherbroyles.com.

Thank you, Wayne for your contributions to Acceler8Success Cafe.

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