An Innovative Look at Managing Franchise Disclosure Documents

Vol. 17 No. 1


Andra Terrell, Luxottica Group S.p.A. (Pearle Vision)

For corporate counsel, it is that time of year once again – time to focus on how to effectively and efficiently manage the Franchise Disclosure (“FDD”) process. Most corporate counsel know the federal and state laws that dictate what information is included in the FDD, but do we really know how to efficiently assemble that information into a cohesive, sales-friendly FDD that also serves and satisfies our internal clients? When I first started out, I thought that all I needed was a copy of the laws, compliance guides, and FAQs. Over time, I discovered that producing an FDD I could be proud of, and my clients could be happy with, involved much more than that. To achieve your ultimate goal – happy clients with a legally compliant FDD in hand – I recommend that you follow the following six pointers:

  1. Meet with your business partners early to find out what needs to be changed or updated. It is easy to forget that the FDD serves two purposes: legal and business. After all, you can’t sell (or award, if you follow the teachings of Management 2000 founder Bob Gappa), a franchise without an FDD, both because the law requires it and because it presents a great synopsis of your franchise program. Make sure you are in touch with your business partner’s objectives, including any franchise program changes that will impact the FDD. Once you determine the objectives, consider summarizing those objectives, including any resulting legal risks, in a PowerPoint or other business-friendly format to gain consensus before you start drafting your FDD. Your business partners will appreciate your proactive approach, and you will find it easier to surface any issues that might impact release of the FDD.
  2. Identify who can provide you with the information you need. Once you have your summary, you will be able to pinpoint the individual or department with the information you need to complete your FDD. It seems elementary, but nothing will slow down your FDD assembly more than failing to identify who is holding the information you need. If you work for an international company with different offices, this process can be harder than you might think. As part of the process, it also makes sense to identify the officers, directors, and people with management responsibility or franchise salespeople who should be disclosed in Item 2 so that you are able to obtain Franchise Sales Agent Disclosure Forms or the five-year employment history as required by federal and state law.
  3. Put together a project plan, including a budget. The temptation is always to dive in and start drafting, item by item. But taking time to create a project plan that identifies specific deliverables and key dependencies will help your business partners and any cross-functional teams understand expectations and timelines that must be met to ensure a smooth issuance and registration process. Include all of the steps, from obtaining the initial information to preparing an initial draft, internal review, auditor review, sales agent disclosures, registration forms, registration, training, and updating any contracts or forms you need for your deals. This is the stage where you can think about outsourcing steps that are appropriate to your needs, such as legal review or registration. Knowing what you would like to outsource will help you budget effectively and maximize those budget dollars. Consider how long each step in your project will take, then plan backward from the date you want to issue your FDD, either from preference or to avoid any lapses in registration.
  4. Use technology to collect data. Gathering information through the tried and true memo format or through oral interviews may lead to late-night nail biting. At the end of the day, paper methods are quickly becoming a thing of the past. Business partners generally prefer methods that allow for data sharing and manipulation. Using electronic surveys or other current data collection methods enables you to track, compare, contrast, share, manipulate, and retain responses year-over-year.
  5. Keep everyone informed of your progress. FDD updates are highly anticipated events because they trigger action from other cross-functional teams, such as your franchise sales team, which is probably waiting for the FDD to be completed or registered before closing a deal, or your auditors, who are waiting for your draft to provide their consent. Communicate your timeline and expectations to kick things off, and then consider having a shared calendar in Outlook, your company intranet, or whatever email server you use. The shared calendar will help those involved in, or concerned with, the FDD update process to stay informed and plan or adjust accordingly.
  6. Train, train, train. Once the much anticipated FDD is issued, make sure everyone concerned – especially your sales team – understands what is in it. Do not forget to review the updated FDD and contracts with your contracts administration department and any other team that may be affected by FDD changes. This will help you achieve a seamless transition from old to new and avoid any potential pitfalls if your FDD incorporates systemic changes.

To get your creative juices flowing, below please find a sample FDD project plan with specific deliverables at right.


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