The Franchise Disclosure Document is a relatively complex document for most people. Sometimes being in franchising for some period of time, it can be easy to overlook this and begin to forget that most buyers haven’t seen an FDD before and certainly the presentation of a 150 page franchise agreement isn’t helping your cause as part of presenting the value proposition to a potential franchise buyer. In franchise sales, the FDD can either be a hindrance to the recruitment process or you can choose to use the FDD as part of your value proposition and know how to effectively present the content.
First, the Franchise Disclosure Document should be drafted according to NASAA Guidelines (http://www.nasaa.org/industry-resources/investment-advisers/franchise-registration-and-disclosure-guidelines/) and should be put together by a franchise attorney in order to present the FDD. Once you present an FDD to a candidate, this constitutes an offer of the franchise, so it is important to make sure that you have registered in the necessary registration states prior to any presentation to a potential franchisee. (http://www.franchiseexpo.com/resources/franchise-articles/feb-2016/franchise-sales-while-managing-the-franchise-state-requirements)
Second, get to know your FDD, the disclosure document and the details included therein. The document offers a great deal of pertinent value to the franchise opportunity. In particular, get to know your Item 6, Item 7 and Item 19 thoroughly in order to be able to present these items in detail. One of the worst mistakes a franchise sales person can make during the franchise presentation is to not know the details and misquote specifics of the franchise offering or have the buyers attorney tell you what is in YOUR franchise offering. Be fluid and detailed when presenting the FDD and able to explain each of the fees, structure and particulars included in the franchise offering.
Third, the Franchise Disclosure Document can be scary to most franchise buyers, make sure that you present this carefully before sending the agreement, otherwise you run the risk of getting a buyer who never picks up the phone again or just decides that you aren’t the right fit for them and says no to the offer entirely. Franchise Marketing Systems has had success presenting a FDD Info Sheet along with the FDD when a client sends the document to a prospective buyer and before the FDD is sent, have a call with the candidate and explain what is being presented and how the document is laid out, make sure that they understand that the document is structured according to FTC guidelines and that there are a wide variety of required disclosures, that although important, are not necessarily specific to your franchise. Walk the franchise candidate through the document and explain each Item enclosed in the agreement so they understand which items to focus on and how to understand what is pertinent to the agreement. Schedule a follow-up call to review the agreement in detail and address all questions they might have. Don’t skim through details, make sure to spend the necessary time on the agreement and make sure that you collect your receipt page from every buyer who is presented the FDD.
Finally, walk the franchise buyer through the close and help them understand how to actually execute the agreement. With Franchise Marketing Systems, we see a significant amount of young franchisors who expect a new franchise buyer to understand what pages to sign and how to execute the agreement without any guidance. Either load your FDD into DocuSign or another electronic signature module, or make notations on the pages that need to be executed. Whatever route you take, make sure to make the process as easy as possible!
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