We are considering a franchise and we are requesting a FDD. The franchisor will not release it before we actually meet their team. What do we do?
We are exploring a franchise and we have been taking conference calls over a series of weeks now - we are scheduled to meet them by flying down to Houston this month, but they won't release their FDD. Our accountant says they are supposed to release this document (laws changed in 2008 where any franchisor is required to release this when a "reasonable request" is made) and we have made a reasonable request. What should we do?
We need to run the numbers and speak to franchisees and we can't do that until we have FDD.
Your accountant is correct, the franchisor may tell you that they want to make sure that you are "really serious" before providing the FDD, but they have a legal obligation to provide it to any candidate requesting it in good faith. They might require you to be financially approved before providing it, but that is a grea area.
They probably have something to hide (poor financial performance, terrible franchisee validation, or lots of litigation) or they plan to pressure you at their Discovery Day or give you a "limited time offer" that will seem too good to refuse. Franchisors who play this way are not good long-term partners...Here are some sites where you can get the FDD from any franchisor registered in MN or CA and another t compare FDD's for franchises in any specific industry.
Contact me directly for more detailed info or if you have further questions!
Ron Bender, CFE
Click "Franchise Registrations" on the pull down
Type in name of Franchisor (this is the only field you need to fill in)
If the model is solid, it's to the franchisors advantage that you want to move forward before Discovery Day. I agree, red flag. If they are taking the hardline this early in the process, your getting a sample of future exchanges. Check with FreeFranchiseDocs.com, they offers most FDDs.
Hello ,As my experience in franchise they should release FDD when ever you complete all the requirments , they shall send their representative to check all these requirments , once you have done all the work ,they have NO reason to delay specially if you have franchisees ,they must be delayed too , So you have to insist & ask them to release it immediatley .with out delay .
Give your offer of counter compelling business model.. meet the Franchise team.. if you can also try the competitor - will be good for negotiations
Well, the FDD has to be provided in advance of any negotiations. If you have had multiple conference calls over a couple of weeks you must by now be interested in detailed franchise info so you can begin to negotiate. Certainly you wouldn't go to the extent of flying to their offices unless you intended to begin negotiations. I'd say it's past the time that they should be providing the FDD. If they don't, run the other way as fast as you can.
Tell them they are supposed to release this document by law when requested.
A good solid franchise would normally release the FDD at a very early stage in the process. I can't think of a reason why they would not want to let you see it unless there is something they don't want you to see. Your discovery day is well into the process, in-fact nearer the end of the diligence process. The franchisor can't offer to sell you anything until 14 days after you sign the FDD. Remember, it is 14 days after you sign it, not when you receive it.
You have lots of great advice already that I concur with. So, if by chance your'e excited about the business you must set aside your emotions about the business focus on the facts and business aspects. Your request is reasonable at the is point in time and just good business so get it or walk. After all, if this is how it will be during the honeymoon period, how might it be if you get together!
run don't walk away from these guys. I assume by waiting until you spend the money to see them at their office and experience their charming personalities the twill think you are committed.
Without full disclosure of revenues, speaking to other franchise owners you may be in for a lot of grief. I've had plenty of experience with the fray area franchisors and most franchise too early, don't have sollid network in place or have not completed their homework before franchising then they use charm to convince people to 'trust' them. Perhaps you can align yourself with a reputable franchise management firm near you to separate the good from bad.
I would move on - this franchisor is clearly not aware of the importance of this relationship. There are many more out there willing to share their FDD and become your partner.