Posted on Blog April 21, 2015
It’s that time of the year again for franchisors to update their FDDs. In addition to updating the FDD within a reasonable time after the close of each quarter to include any material changes, the Federal Trade Commission’s Amended Franchise Rule (16 C.F.R. Part 436) requires franchisors to update their FDDs annually within 120 days of the close of each fiscal year. For most franchisors, this means that the annual updates, including updated audited financial information, must be completed by April 30. After April 30, franchisors can only use their updated FDD and no other to disclose prospective franchisees. If a franchisor fails to update its FDD by April 30, the franchisor will not be able to offer the franchise to prospective franchisees until such time as its FDD is updated. Being aware of this requirement is extremely important for both franchisors and prospective franchisees, particularly around this time of year. For franchisors, using an outdated FDD is a violation of the FTC’s Amended Franchise Rule. For prospective franchisees, receiving an outdated FDD could entitle them to rescission and/or other damages.