FDD Franchise Disclosure Document – Know More
The UFOC Has A New Name and A Few New Twists Read All About It
Yes, even though it happened in 2008 the change from the old UFOC to the new FDD Franchise Disclosure Document is still big news in the franchise circles. The Federal Trade commission had not revamped the document since its inception in 1979. Some say it was long overdue.
The FDD still will provide the necessary information to prospective franchisee’s so they may make a more knowledgeable choice but there are several additions that must be mentioned.
1. In the old standards the first meeting was when the FDD was to be given to the prospective franchisee. This is no longer required as long as the franchisor or its representative gets the document to the prospect at least 10-14 days in advance of the signing. These are calendar days and not business days.
2. Under the old guidelines of the UFOC the final documents had to be supplied within five business days of closing. This has been the cause of a lot of confusion. Setting the deadline according to calendar days, seven to be exact, has changed that. This will make closing go a lot smoother.
3. The new FDD franchise disclosure document can be sent electronically now and the signatures are being accepted in a variety of ways so we no longer have to use couriers or registered mail. The franchisor merely has to inform the prospect what forms the document is in and make them available for faxing or downloading. The signature could take the form of a password, code or even an E-Signature will work now.
4. More details are being disclosed than before as well. Like the number and nature of any lawsuits or bankruptcies. Information about parent companies if the franchise is a subsidiary and if any of the officers has an interest in any of the suppliers they are promoting. One thing that is making a wave is the new disclosure regarding whether there is a gag order on previous franchise owners.
5. Under the new FDD the franchisor must disclose if the franchise they are selling is one that was previously held and by whom. They also have to give information for all the franchises that were sold, transferred or terminated for the past three years and why. If the franchise was previously owned they will have to provide the potential new owner with documentation on the owners for the last five years. This must include name and contact numbers.
So you see it was a big job, not just a facelift. The reconstruction was an attempt to make things easier for all parties involved and provides the potential franchisee with even more information for decision making.