Renewal season is upon us. Franchisors with fiscal years coinciding with the calendar year are now in the throws of updating their Franchise Disclosure Document. Given strict deadlines and the inherent difficulty in collecting the required information, having a plan for the updating process is critical. Here are five tips that can help your FDD updating process be more efficient this renewal season:
1. Know Your Deadlines. A franchisor violates federal and state franchise sales laws by offering or selling franchises with an out-of-date FDD or expired registration. Under the Franchise Rule of the Federal Trade Commission, the FDD expires 120 days after the franchisor’s fiscal year end. So, if the franchisor operates on a calendar year, the FDD expires on April 30. On the state side, registration periods vary. Some states set registration periods tied to the franchisor’s fiscal year end, while other states determine registration periods based on the franchisor’s original effective date in that state. Moreover, franchisors should be sure to check states laws for automatic renewal deadlines and treat them as the real filing deadline, rather than the registration expiration date. Missed deadlines could force the franchisor to suspend all solicitation activities in the state. In sum, know the deadlines in each jurisdiction in which you sell or offer franchises, docket and track those deadlines, and keep your sales staff apprised of any lapses in registrations.
2. Develop A Plan for The Update Process. If you don’t already have one , set up a process to identify and assign each task that needs to be completed. Identifying how much time each task will take is critical. Create a timeline for each task to provide yourself sufficient time to review and check all the necessary information and details.
3. Alert Your Auditors. Tell your auditors, in advance, what your FDD deadlines are so they are prepared to meet them.
4. Keep A Running List All Year Long. Maintain a list year-round with issues, typos, corrections, questions, and business changes to address in your next FDD update .
5. Communicate the Transition to the New FDD. Executives should compare the old FDD to the new FDD and understand what’s changed. All changes and the schedule for issuing the new FDD need to be clearly communicated to the sales team. Be sure to talk to the sales team about which states the FDD will be filed and registered in, as well as any “dark” periods in registration states. This information helps your sales team focus on closing deals before the transition. Keep in mind that franchisors must re-disclose to all prospects in the sales pipeline when the transition to the new FDD occurs.