The FTC Franchise Rule requires that your Franchise Disclosure Document be provided to prospective franchisees fourteen calendar days before the execution of the franchise agreement. Also, you must deliver the completed franchise agreement to the prospective franchise at least seven calendar days befour execution. Untimely disclosure and contract delivery are common claims against franchisors.

The other major source of mistakes and legal violations in the franchise sales process is the distribution of an FDD that may be outdated or contain obsolete or inaccurate information. Keeping track of the changes in a company’s FDD over time and making sure that the current version is used at all times is a difficult task. Furthermore, the franchisor must be careful to provide customized disclosures to prospects in certain states where regulations differ from the format required by the FTC Franchise Rule.

Understand the Major Sources of Franchisee Claims

Failure to make timely disclosure and the use of inaccurate or obsolete disclosure materials, provide plaintiffs’ lawyers with the bulk of the claims that they file against franchisors.

In order to avoid and defeat these sorts of claims, a franchisor must have a system in place for making accurate and timely disclosure to all prospective franchisees. They must also maintain an accurate record keeping system that allows them to prove when and how proper disclosure was made.

Set Up a Turn Key System for Timely and Accurate Disclosure

At Kern & Hillman, LLC, in addition to drafting your disclosure documents, we offer a turn key solution to these disclosure pitfalls. Allow us to manage the production and distribution to prospective franchisees of your disclosure materials. We will manage the updates and state-specific disclosures and maintain records of dates of distribution and receipt as well as maintaining signature receipts from all prospects disclosed pursuant to your instructions. Our program will provide you with complete electronic files of all disclosures and records of disclosure and receipts.

We provided clients with electronic access to disclosure files on a current basis, providing real time access to electronically imaged files combined with the knowledge that the records are updated and accurate but without the overhead of a paraprofessional staff in house.

We provide these FDD production and management services either on a subscription basis or for a per transaction charge.


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