RWO Franchise Law Blog: Four Ongoing Franchise Disclosure and Registration Update Requirements

As a franchisor, you are required to update your Franchise Disclosure Document (“FDD”) on an annual basis with your latest financial statements and other current information.  If you are making offers or sales in any registration states, you also must renew your state registrations annually.  However, there are certain situations where Federal and state law require updates to FDDs or filings on a more frequent basis.  Below are four examples of these:

1.  Material Changes to the System  -  Updating of your FDD and state registrations is required in cases where there are “material” changes in your franchise system during the course of a year.  The analysis of whether a change is material always hinges on the specific facts and state laws involved, and you should consult a franchise law attorney to discuss whether a particular change is “material.”  While the Federal franchise rule requires most FDD updates reflecting material changes to be made quarterly, some states require these updates to be made more quickly.

2.  New Advertising Materials  -  Some franchise registration states require filing of advertising materials before the advertising materials are first used in those states.  A failure to do so makes the use of the advertising materials in those states unlawful.

3.  Negotiated Changes in California  -  If you sell franchises in California, and if you negotiate changes to your standard form of franchise agreement with any franchisee in that state, California requires that you file a notice of such changes and immediately update your FDD to disclose the negotiated changes to future prospects in California.

4.  Maryland Quarterly Sales Reports  -  If your system is registered in Maryland, you must file quarterly sales reports in that state.  These reports need to identify each new franchisee in Maryland during the applicable quarter, and must be filed even if there have been no sales.

While this is not a comprehensive listing of every potential event that may arise over the course of the year requiring action, such as an FDD amendment or a state filing, we hope that it provides a helpful reminder of some important and often-overlooked events that require immediate attention.  The franchise, distribution and licensing law practice group at Robinson Waters & O’Dorisio has experience in helping franchise systems comply with these ongoing requirements.

This RWO Franchise Law Blog entry has been written by Robert Bliss of Robinson Waters & O’Dorisio.