Updated Franchise Disclosure Document

The franchisor’s disclosures may change between the time you receive the Franchise Disclosure Document (FDD) and the time you sign the franchise agreement. For example, the franchisor may have updated its FDD each calendar quarter and must update the FDD after its fiscal year ends.

You have the right to ask for a copy of any updated information before you sign the franchise agreement. An updated FDD may reveal new lawsuits were filed by or against the franchisor, changes in the franchisor’s management or training teams, more current financial performance data, or other useful information.

Additional Sources of Information

Accountants and Lawyers

In addition to reading the franchisor’s FDD—including any updates—and speaking with current and former franchisees, consider talking to an accountant and a lawyer. An accountant can help you understand the franchisor’s financial statements, develop a business plan, assess any earnings projections and the assumptions they’re based on, and help you pick a franchise system that is best suited to your investment resources and goals.

A lawyer can help you understand your obligations under the franchise contract. These contracts usually are long and complex. A problem that comes up after you have signed the contract may be very expensive to fix—if it can be fixed at all. Choose a lawyer who is experienced in franchise matters and rely on your lawyer or accountant for a recommendation about whether to buy a particular franchise.

Banks and Other Financial Institutions

If you need financing to buy a franchise, a bank lender may be able to provide you with a Dun & Bradstreet report or similar financial profile of the franchisor. The bank may also obtain sales and profit information from the franchisor, even if the franchisor won’t give you that information. But some franchisors give banks unrealistic, overstated profit projections so the bank will provide financing to expand the franchise system. Remember that bank approval of a franchise loan doesn’t necessarily mean the franchise is a safe or good investment.

Better Business Bureau

Check with the local Better Business Bureau (BBB) in the cities where the franchisor has its headquarters and the city where you’re thinking of buying a franchise. Ask whether there are complaints on file about the franchisor’s products, services, or personnel.

Government

Several states have registration or disclosure laws that regulate the sale of franchises. Some states have laws meant to protect franchisees after they buy. The FDD should include information about any such laws in your state. If the information isn’t in the FDD, check with your state Attorney General’s office, office of consumer affairs, or state securities division.

In Nevada, franchisors are required to provide potential franchisees with a Franchise Disclosure Document (FDD) that contains vital information about the franchise. This document must be updated annually after the franchisor's fiscal year ends, and may also be updated quarterly. As a potential franchisee, you have the right to request the most current FDD before signing the franchise agreement. The updated FDD may include new information such as recent litigation, changes in management, and updated financial performance data. It is advisable to consult with an attorney experienced in franchise law to understand the obligations under the franchise contract, as well as an accountant to help with financial statements and business planning. Additionally, you may seek further information from financial institutions, the local Better Business Bureau, and state regulatory agencies. Nevada has specific laws that regulate the sale of franchises and may offer protections for franchisees. For complete and current information, contacting the Nevada Attorney General’s office, office of consumer affairs, or state securities division is recommended.