Sending the correct Franchise Disclosure Document (FDD) is a critical consideration of the franchise sales process. The consequences of sending the wrong FDD can range from prohibitions on selling further franchises to civil penalties, or even criminal prosecution.
The process of sending FDDs has traditionally been manual, which allows for the potential of human error and can be a logistical nightmare since many states require their own versions of the document to be registered in their state.
What is the Right FDD?
The “right” FDD varies by date and by state. For an FDD to be sent to a prospect, it must not have reached its expiry date, and it must be registered in the state (where states require it).
Consequences of Sending the Wrong FDD
Sending the wrong FDD can result in both federal and state consequences.
Federally, the FTC could prohibit the franchisor from further violating the FTC Franchise rules, effectively preventing them from selling further franchises until the issue has been resolved. The FTC can also seek civil penalties and/or consumer compensation.
At the state level, existing registrations may be revoked, civil action is possible (resulting in damages and/or penalties), or even criminal prosecution. Some states also allow the prospective franchisee to launch private civil action to recover damages (actual and punitive).
Even if an accidental transmission of an incorrect FDD doesn’t result in the consequences outlined above, it may still cause reputation damage and cause the franchisor to miss out on a high quality prospect.
The bottom line is that the consequences of sending the wrong FDD to a prospect can be very serious.
How Does Zorzees Help?
Zorzees simplifies the entire FDD disclosure process, and helps avoid sending the wrong FDD to a prospect. Zorzees incorporates electronic controls and automation to ensure the right FDD is sent to the right prospect, every time.
Within the Zorzees platform, an unlimited number of FDDs can be uploaded for a franchise brand. This allows to customize by state, to account for state-specific FDDs and to set individual expiry dates. The system will then only allow the franchisor (or Area Representative) to send an FDD to a prospect if there is a valid FDD on the platform for that state. Once an FDD has expired, that FDD will no longer be able to be sent to prospects until a new FDD has been uploaded.
Each prospect application within Zorzees tracks which version of the FDD was sent to the prospect, the date it was sent, and the e-receipt. This way, there is a permanent track record of the FDD disclosure process, protecting the franchisor in the case of future disputes.
Further, to help motivate prospects to sign the FDD receipt, a series of drip email reminders can be sent to the prospect and lead owner letting them know that the prospect has not yet acknowledged their receipt of the FDD.
Zorzees makes the entire FDD disclosure process simpler for franchisors, reducing the risk of human error in sending the wrong FDD, and maintaining a record of the entire disclosure process.