Many franchisors fiscal year completed at the end of 2010, so now is the time when you should be gathering the information needed to update your franchise disclosure document (FDD).
The FTC requires a franchisor to update its FDD within 120 days of the close of its fiscal year. At the end of the 120 day period, the franchisor may only offer and sell using the updated FDD. In addition, many states franchise renewal laws also work off the same fiscal year deadlines. Below are 3 quick tips franchisors should follow to meet their updating deadline:
- Contact your accountants or finance division now and remind them that audited financials must be completed before April 30th. Many delays in updating an FDD will be the result of auditors not having adequate time to prepare the financials. For franchisors filing state registration renewals the deadline for the audit may be sooner. Some states require that renewal registration applications be filed days or weeks in advance of the 120 day deadline.
- Begin compiling the additional information needed to update your FDD in an organized and complete manner. This includes changes to executive personnel, disclosure of new ligitation, and current franchise sales data for the 2010 year.
- Make sure that the outside or in-house counsel responsible for overseeing the final updates or filing state renewals are provided with accurate draft documents and other information with ample time to review, revise, comment, and finalize. Seasoned franchise counsel should have a streamlined system in place for handling updates and renewals. The starting place to this process, however, is getting accurate information from the franchisor.
Failing to update or file renewal registrations on time can impede a franchisor’s ability to offer and sell. Therefore, it is important to get a head start on the process to give all parties involved adequate lead time.