Should I have a financial performance representation (FPR) in my FDD?

When I get asked this question, I respond as follows: “The FDD has 23 Items. If there were just one Item in the Franchise Disclosure Document (FDD) you could look in deciding whether or not to buy a franchise, which Item would it be? I don’t care what it is, how much it costs, I need to know if it makes money.” FDDs tend to be packed with information and details, and prospective franchisees often…

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California Franchise Exemptions: A Franchisor’s “FastPass” to Selling Franchises

Nobody wants to wait in line…especially when you’ve worked hard and paid a lot of money just to get to the entrance. Disneyland first introduced the FastPass in 1999. This pass lets them skip the long lines for popular rides. It’s a win-win because FastPass frees guests to enjoy their time—and spend more money—elsewhere in the park. In California, the process to register a new franchise offering…

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YES VIRGINIA, THERE REALLY IS A CONFIDENTIALITY CLAUSE!

Confidentiality or non-disclosure agreements (NDA’s) come in different forms and sizes, from stand-alone NDA’s to just a couple of sentences in a long commercial contract. Unfortunately, at times NDA’s are one-sided, overreaching, and create unrealistic obligations. Complicating matters is that vendors (e.g. supplier, service provider, consultant) often present a franchisor with an NDA which…

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How to Find Franchise Disclosure Documents (FDDS) Online for Free

There are four states that publish FDDs online. California https://docqnet.dbo.ca.gov/search/ California’s search engine is slow to update, but every document associated with a franchise registration (FDDs, blacklines, applications, permits) is available on the site, once they get around to updating it. Sometimes you have to know the exact name of the franchisor to be able to find the filing.…

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Selling Franchises in Registration States

I’ve just issued my FDD and want to start selling franchises with it. What are the next steps? This depends on where you’d like to sell franchises. Registration states require you to file your FDD and pay a fee, and most of these states have a formal comment letter process. Before you can start selling in the registration states, you’ll need to receive an acknowledgement or permit from the……

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When does my FDD expire?

Your FDD will expire on a national level 120 days after your fiscal year end. So, if your fiscal year end is December 31, your FDD will expire on April 30. When your FDD expires in a certain state will depend on whether that state’s registration is tied to your fiscal year end or if it is tied the effective date of registration. For example, several states’ registrations also expire 120 days…

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Required Financials for Your FDD

1. What financials are required for a franchisor operating in the United States? The Federal Trade Commission requires audited financials for the franchisor for the last three fiscal years before the Franchise Disclosure Document issuance date. This means you need a balance sheet for the last two fiscal year-ends and a statement of operations, stockholders’ equity, and cash flows for the last…

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Franchise Financial Assurance Options

To defer, or not to defer, that is the question. A blog on state registration financial assurance options. As most franchisors know, there are 14 states that require a registration of the Franchise Disclosure Document (“FDD”). Of these 14, nine states will review the franchisor’s financial statements and impose financial assurance requirements if the franchisor’s financial health is not up to…

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Talent Investment Protection Non-Solicitation Provisions Under Political Attack

What is a non-solicitation provision? A non-solicitation provision is an agreement that prohibits franchisees from lobbying or taking any employees from the franchisor or other franchisees. It’s also called a “no-poaching” provision. Why do franchise agreements have non-solicitation provisions? Each franchise system is unique, and it takes time to train employees to do things the “system-way.”…

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