d.marketing goals.ANS: DPTS: 1REF: p. 122OBJ: 4-3 TYPE: CNAT: Analytic | Ethical and Legal40.Most franchise experts recommend that the FDD be examined carefully byPTS: 1REF: p. 122OBJ: 4-3 TYPE: CNAT: Analytic | Ethical and Legal Show
Get answer to your question and much more 41.Susan is considering buying the local franchisee ofPots-R-Us. The owners would probably state thisreason for selling when in actuality the other three reasons may be more likely.PTS: 1REF: p. 127OBJ: 4-4 TYPE: A Get answer to your question and much more NAT: Reflective Thinking | Dynamics42.Craig Slavin, as the chairman and founder ofFranchise Architects, felt thatPTS: 1REF: p. 119OBJ: 4-3 TYPE: CNAT: Analytic | Value Creation Get answer to your question and much more 43. Which consideration doesnotneed to be well thought out before deciding to franchise a business?a.Is the business model replicable?b.What will be included in the operations manual?c.How will the growth be financed?d.What proprietary information will be included in the FDD?ANS: DPTS: 1REF: p. 120OBJ: 4-3 TYPE: C NAT: Analytic | Value Creation44.The purchase price of a business is determined by negotiation betweenPTS: 1REF: p. 129OBJ: 4-4 TYPE: CNAT: Analytic | Finance Get answer to your question and much more
45.In evaluating the financial health of an existing business that available for purchase, all of thefollowing historical documents must be examinedexcept Get answer to your question and much more The Franchise Disclosure Document, also referred to as an "FDD," is a legal document and prospectus that the FTC requires franchisors to disclose to prospective franchise buyers 14 days before selling a franchise or receiving any fees. The contents of the FDD are regulated by federal and state franchise laws and within every FDD are 23 disclosure items that include information about the franchisor, the franchisor's management team, estimated start-up expenses, legal obligations, and other information about the franchise opportunity. Within the franchise registration states franchisors must file and register their FDD at the state level. Every FDD must include the following 23 disclosure items:
Franchise Disclosure Document FAQ'sThe the issuance date of a FDD is the date that the franchisor designates its FDD as being complete and in compliance with federal franchise laws. Compliance and the determination of the issuance date is a self-certifying process in that there is no federal agency that reviews or registers FDDs. At the state level, within the franchise registration states, the FDD must be registered with a state examiner who will, after a review process, grant or deny registration. Under the Federal Franchise Rule, the FDD must be disclosed to a prospective franchisee not less than 14 days prior to the prospective franchisee signing a franchise agreement or paying any money to the franchisor. Disclosure of the FDD by itself is not enough; commencement of the 14-day period is governed based on the day that the franchisee signs the FDD receipt page contained in Item 23 of the FDD. Certain states have modified this 14-day period. Learn more about the FDD disclosure period. When dealing with the franchise registration states, the FDD must be filed and registered with a state franchise examiner before offering or selling a franchise within the state. When dealing with the franchise registration states, if (a) the prospective franchisee resides in a franchise registration state, (b) the franchised business will be developed and located within a franchise registration state, or (c) the franchisor is marketing/offering the sale of franchises in a franchise registration state, then the FDD must be registered in that state. Also, New York franchisors (i.e., franchisors incorporated in New York or who operate from New York) must register their FDDs in New York (in addition to the other states) whether or not the franchisee or franchised business is located in New York. Yes. Within the franchise registration states, FDD registration must be renewed on an annual basis within 120 days of the franchisor’s fiscal year end. Since state examiners will need time to review a franchisor’s registration renewal application, it is important for franchisors to submit their renewal applications well before the 120-day renewal deadline - otherwise a franchisor
risks “going dark” in that state, whereby their initial registration expires before renewal is granted. Every year, the FDD needs to be updated and FDD registrations must be renewed. To learn more about the franchise registration states and state-specific requirements for registering and filing an FDD, visit our interactive franchise registration map. The FDD must be issued and updated no less frequently than annually, within 120 days of the franchisor’s fiscal year end. However, if there are material changes in the information contained in the FDD, then the FDD must be updated on a quarterly basis or immediately for material or misleading information. Learn more about when the FDD needs to be updated. Yes. As a part of FDD Item 21, the FDD must contain audited financial statements of the franchisor. However, in most states, for new franchisors that have not previously offered or sold franchises, there is a partial financial statement phase-in exemption wherein a start-up franchisor may initially issue its FDD with an unaudited opening balance sheet. However, many registration states do not recognize this phase-in process. Learn more about
the financial statements that have to be included in the FDD. If during the franchise sales and negotiating process a franchisor makes changes to the franchise agreement, if those changes were negotiated changes requested by the franchisee and for the benefit of the franchisee, then the franchisor does not need to amend its FDD.
Franchisors should be cautious as to negotiated changes to the franchise agreement, as FDDs most likely contain a representation that a franchise offering is “uniform” as to what the franchisor offers and grants to franchisees. Because the FDD must be provided to prospective franchisees before selling a franchise or accepting any fees, the FDD is an integral part of the franchise sales process. When evaluating and comparing franchise systems, prospective franchisees and franchise brokers will compare and evaluate your FDD from a business perspective as to how well your franchise offering stacks up against your competitors. Consider some of the following business points:
To Learn More About how we can help Franchise Your Business, Register Your FDD, and Grow Your Franchise, contact us at (800) 976-4904 or fill out our contact form.More About the FDDWhat is included in a franchise disclosure document?A Franchise Disclosure Document includes 23 specific pieces of information (called items), the franchisors franchise agreement, and various exhibits (like a list of current and past franchisees, and audit financials of the franchisor.
How many items are in a franchise disclosure document?The FDD is divided into twenty-three sections or “Items”, each of which require a franchisor to disclose certain information to assist prospective franchisees in making a well-informed decision before investing in the franchise.
Which of the following is not generally included in a franchise agreement?Which of the following is not generally included in a franchise agreement? The price at which the franchisee sells the goods. Suppose Zander sues your partnership, which has four partners.
What is Item 19 in a franchise disclosure document?FDD Item 19 is the section of the Franchise Disclosure Document where franchisors must disclose their financial performance representations. If a franchisor elects to make a financial performance representation, it must be fully disclosed in Item 19 and must comply with federal and state franchise laws.
|