The pandemic has had an outsized impact on nearly every aspect of our lives—careers, travel, education…. and the same is true for Item 19 of the FDD.
Franchise Marketing and Advertising Materials
Required Financial Statements in the FDD
The Federal Trade Commission requires audited financials for the franchisor for the last three fiscal years before the Franchise Disclosure Document issuance date. This means you need a balance sheet for the last two fiscal year-ends and a statement of operations, stockholders’ equity, and cash flows for the last three fiscal years.
California AB-5 Legislation
Many franchisors are wondering what changes they should make in response to California’s AB-5 that went into effect on January 1, 2020. In a nutshell, we don’t think it makes sense to make any significant changes to a franchise system because the applicability of AB-5 to franchisors isn’t fully determined, and there will likely be changes to this law in 2021.
California Consumer Privacy Act - CCPA
New Rules for Drafting an Item 19
FDDs tend to be packed with information and details, and prospective franchisees often review several FDDs before making their decision. But in reality, most franchisees are looking for one thing: a franchise that will bring a good return on their investment. This is why most prospective franchisees would say that Item 19 is the most important Item in the FDD: if the Item 19 does not pass the test, none of the other items are relevant.