The FDD Review Phone Call (or video call) is to go over the FDD together, explaining any “tougher” items (without going into minute detail), being sure to cover the major items as well: Items 3 and/or 4 (if needed), items 5, 6, 7, 11, 12 (if needed or not yet discussed on previous call), items 17, 19 (if you have one) and touching on the tables in item 20. If needed to not overwhelm the candidate, you can break the call up into two sessions, but if not necessary – do not drag out this call, too much unnecessary detail can also kill a deal.

  • Only qualified candidates should progress to this step in the process
  • “How much can I make if I buy your franchise” – Can only be answered if you have an Item 19 (an earnings claim). Consult with your attorney how to answer earnings claim’s questions appropriately.
    • Item 19 or No Item 19 – you can provide a cost sheet, a blank P&L with the line items, the only things you cannot do is mention margins, percentages, or gross profits if you do NOT have an Item 19.
    • If you do not have an Item 19 but want to add one or seek more details on what you can and cannot say regarding your Financial Performance Representations, reach out to your legal team for guidance.
  • All principals should sign their own FDD Receipt, however guarantors are only typically needed for the Franchise Agreement signatures.
  • Go over FDD Receipt, its meaning and the importance of required signatures.
    • FTC (Federal Trade Commission) Rule requires a 14-day “waiting” period once the receipt is signed to be able to then sign an agreement and purchase the franchise. (Signatures of a Franchise Agreement would happen only on or after the 15th day after the waiting period.)
      • Through CAP and DocuSign you have access to send your personalized link to candidates to be able to get them disclosed on your most up-to-date FDD.
  • Collecting the receipt earlier (rather than at the Discovery Day) will create less of a delay later on in the process
  • Once the receipt is received, that starts their 14-day waiting period which is their window of opportunity to hire an attorney for them to review the FDD/Agreement. Encourage making this a point of mention so a review/comments does not slow down your franchise agreement signing down the road.

Having a broker on the FDD Review Call can be helpful because they should be FDD savvy and can jump in with assistance at any point needed. But approach the broker invitation to this call with caution – some brokers/consultants could overstep their legal responsibility and should not be on the call; and it is possible that less experienced brokers/consultants could interfere with the call, asking too many questions, which could end up hurting the sale. The decision to have a broker/consultant salesperson on the call is yours, you can invite them to the Initial Call and calls after the FDD Review Call, they should normally excuse themselves from this particular step but if the candidate wants them on the call they can be. A good broker/consultant would have already spoken to their candidate before their FDD Call to help prepare them with generic questions to ask and items to be more detailed about. Feel out the steps prior to see how you wish to proceed with this.

Having an FDD Review Call is not a required step – the document needs to be sent to the candidate for review and receipt signatures must be collected, but an overview/breakdown of the FDD is not required to be had. However, it is good practice to offer an FDD Review Call – it will show transparency, strength and confidence within your model and brand.

Once your Franchise Disclosure Document is drafted and you’ve launched your franchise, you will be granted access to be able to login to DocuSign. DocuSign is where you will have access to view all pending and signed documentation kept within our records. When you have a candidate to disclose, please use the templates and links shared with you from your paralegal. When your link is accessed by the candidate, they will see a picture of the US Map, they will select their state and then will be asked to sign the FDD through DocuSign. When a candidate completes the DocuSign, you will get an email notification that it was signed/completed.

Your personalized disclosing links will take a candidate to the US Map, once the state is selected, it will pull them to the DocuSign, which means that the map data is being pulled directly from our sites which is always automatically being updated. Therefore, the link will remain the same for you. We recommend bookmarking the link so you have it nearby and quickly whenever needed.

Even though you have access to the documents through your DocuSign login, the collection, organization and follow up is the responsibility of the franchisor.  Many franchisors use sales management programs, (i.e. Salesforce or eMaximation). If you want to learn more about sales management programs, reach out to Client Relations.

Don’t Forget

All franchisors should have a Franchisee Application, where within the sales process this is, is up to you. Once this type of “homework” is assigned to the candidates, remember to collect it and/or request it to be completed before moving to your next steps within the sales process.

  • We have sample franchisee application forms; if needed reach out to Client Relations.
    • Background Checks and Credit Checks needing to be completed should be done through a vetted third-party supplier and not done by the franchisor. For recommendations for outsourced companies, reach out to Client Relations.

Please email fieldguide@spadealaw.com if you have any suggestions, comments, correction or additions for the Field Guide. The purpose of the Field Guide is to create an organic, ever expanding resource of best practices for franchisors and your feedback and input is always welcome.