How do you develop a strong franchise disclosure document?

1 Know the FDD requirements

The first step to developing a strong FDD is to understand what the FTC and your target states require you to disclose. The FTC has a Franchise Rule that specifies 23 items of information that you must include in your FDD, such as the franchise history, the initial and ongoing fees, the estimated initial investment, the restrictions on sources of products and services, the financial performance representations, and the franchise agreement. You can find the full list of items and the guidelines on how to prepare them on the FTC website. Additionally, some states have their own franchise laws that may impose additional or different disclosure requirements, registration procedures, or exemptions. You should consult with a franchise attorney or a franchise consultant to ensure that you comply with all the applicable laws in your target states.

2 Highlight your competitive advantages

The second step to developing a strong FDD is to highlight your competitive advantages and the benefits of joining your franchise system. You want to use your FDD as a marketing tool that showcases your brand, your culture, your values, your training and support, your innovation and technology, and your track record and testimonials. You can use the FDD items to demonstrate how you differentiate yourself from other franchise opportunities and how you help your franchisees succeed. For example, you can use the item 2 to describe your business experience and qualifications, the item 11 to detail your pre-opening and ongoing assistance and resources, the item 19 to provide financial performance representations (if you choose to do so), and the item 20 to show your growth and stability.

3 Be clear and consistent

The third step to developing a strong FDD is to be clear and consistent in your language and presentation. You want to avoid any ambiguity, confusion, or contradiction that may lead to misunderstandings, disputes, or litigation. You should use plain and simple language that is easy to read and understand, and avoid any jargon, acronyms, or technical terms that may confuse your readers. You should also use the same terms and definitions throughout the FDD and the franchise agreement, and make sure that they match your operations manual and other documents. You should also use a consistent format and style for your FDD, such as headings, fonts, colors, tables, charts, and graphs, and follow the FTC and state rules on how to organize and present your FDD.

4 Update and review your FDD regularly

The fourth step to developing a strong FDD is to update and review your FDD regularly to reflect any changes in your franchise system, your financial situation, your legal status, or the market conditions. You should update your FDD at least once a year, or more frequently if there are any material changes that affect your franchise offering. You should also review your FDD periodically to ensure that it is accurate, complete, and compliant with the current laws and regulations. You should also seek feedback from your franchisees, your franchise sales team, your franchise attorney, and your franchise consultant on how to improve your FDD and make it more appealing and informative.

5 Provide your FDD in a timely manner

The fifth step to developing a strong FDD is to provide your FDD in a timely manner to your prospective franchisees. The FTC and some state laws require that you deliver your FDD to your prospects at least 14 days before they sign any binding agreement or pay any fee to you. This gives them enough time to review your FDD, ask questions, conduct due diligence, and consult with their advisors. You should also provide your FDD in a format that is convenient and accessible for your prospects, such as electronic, paper, or online. You should also keep a record of when and how you delivered your FDD to each prospect, and obtain a signed receipt of delivery from them.

6 Train your franchise sales team

The sixth step to developing a strong FDD is to train your franchise sales team on how to use your FDD effectively in the sales process. You should educate your sales team on the contents and the purpose of your FDD, and how to present it to your prospects in a professional and ethical manner. You should also instruct your sales team on what they can and cannot say or do when discussing your FDD with your prospects, and how to handle any questions, objections, or concerns that may arise. You should also monitor and evaluate your sales team's performance and compliance with the FTC and state rules, and provide them with feedback and coaching on how to improve their skills and results.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?